Background 141

State of the
Sector Report
on Philippine
Furniture
2005
Background 143

The State of the Sector Report- Philippine Furniture 2005 is

one of a series of State of the Sector Reports published by Pearl2
Project for 2005. This report updates the State of the Sector Re-
port on Furniture prepared last year.

Pearl2 is a project funded by the Canadian International

Development Agency and managed by Agriteam Canada Consulting
Ltd..

Pearl2 is a five-year initiative (2002-2007) designed to support

the development of small and medium enterprises throughout the
Philippines. It aims to help create meaningful jobs through the
strengthening of Business Support Organizations (BSOs) and
Investment Promotion Centers (IPCs).

This report uses the definition provided by the Department of

Trade and Industry (DTI) for micro, small and medium enterprises.
Micro firms are companies with assets totaling below Php3 million.
Small enterprises are those with total assets of over Php3 million
to Php15 million, while medium enterprises have assets ranging
from over Php15 million to Php100 million.

The Field Office of the Pearl2 Project is located at:

144 State of the Sector Report - Philippine Furniture

Pearl2 Project
Technical Paper #1 (2006 Series): “State of the Sector Report –
Philippine Furniture 2005” February 2006

All rights reserved. No part of this document may be reproduced, stored in

a retrieval system, transmitted in any form or by any means, or otherwise
circulated in any form, binding or cover, other than the form, binding and
cover in which it was published, without prior written permission of
Agriteam Canada Consulting Ltd., on behalf of the Canadian International
Development Agency.

Agriteam Canada Consulting Ltd.

Suite 200
14707 Bannister Road S.E.
Calgary, Alberta
T2X 1Z2
Canada
http://www/agriteam.ca

Disclaimer

This report was based on information and materials gathered and prepared
by contracted advisors to the Pearl2 Project. The judgments expressed do
not necessarily reflect the views of the Pearl2 Canadian Executing Agency
(Agriteam Canada Consulting Ltd.), the funding agency, the Canadian
International Development Agency or the Project’s Philippine partner the
Department of Trade and Industry.

While every effort has been made to ensure accuracy of the information
contained in this technical paper, this is not guaranteed. Accordingly,
neither the Canadian Executing Agency, the Canadian International
Development Agency nor the Department of Trade and Industry accepts
Background 145

Contents
Background....................................................................1
Methodology........................................................2
Limitations...........................................................2
Acknowledgements.................................................3

Executive Summary...........................................................5

Industry Overview.............................................................9
Product Coverage..................................................9
Industry Background...............................................9
Industry Coverage................................................10

Global Market for Furniture...............................................13

World Imports of Furniture.....................................13
Chart 1: World Furniture Imports, 2002-2004
Chart 2: World Furniture Imports by Major Country, 2004
Chart 3: World Furniture Imports by Major Country,
2002-2004
World Furniture Exports.........................................16
Chart 4: Major Furniture Exporters, 2004
China Furniture Exports.........................................17
Chart 5: China Furniture Exports, 2000-2004
US Furniture Imports............................................19
146 State
Stateofofthe
theSector
SectorReport
Report- -Philippine
PhilippineFurniture
Furniture

Global Market for Furniture (cont’d)

Exports of Philippine Furniture................................25
Chart 13: Philippine Furniture Exports, 2000-2004
Chart 14: Philippine Furniture Exports by Product, 2004
Chart 15: Philippine Furniture Exports by Country, 2004
Table 2: US Imports of Furniture from Selected Asian
Countries, 2004
Table 3: US Imports of Furniture from Selected Asian
Countries, 2000-2004
Table 4: Imports of Furniture from Selected Asian
Countries by EU 25 Members, 2004

Sectoral Profile..............................................................31
Overview of Survey Findings....................................32
Chart 16: Distribution of Furniture Survey Respondents
by Amount of Export Sales, 2005
Chart 17: Distribution of Furniture Survey Respondents
by Amount of Local Sales, 2005
Metro Manila Key Survey Findings.............................36
Date of Establishment, Company Setup, Ownership
and Management, Product Line, Facilities, Employment,
Subcontractors. Sources of Raw Materials, Mode of
Production and Operation, Capacity Utilization,
Quality Control, Product Development, Market
Coverage, Export Markets, Marketing Channels and
Activities, Competitors, Sales, Finance, Source of
Assistance
Cebu Key Survey Findings.......................................47
Date of Establishment, Company Setup, Ownership
and Management, Product Line, Facilities, Employment,
Subcontractors. Sources of Raw Materials, Mode of
Production and Operation, Capacity Utilization,
Quality Control, Product Development, Market
Background
Table of Contents 147

Production Management...................................................65
Overview of the Furniture Manufacturing Process........66
Inputs...............................................................66
Figure 1: General Process Flow of Furniture Manufacture
Processes and Methods.........................................68
Finished Products................................................71
Manufacturing Systems and Processes.......................71
Production System...............................................71
Capacity............................................................72
Seasonality of Demand...........................................72
Working Period....................................................72
Scheduling.........................................................73
Deliveries...........................................................74
Production Monitoring..........................................75
Manufacturing Cost..............................................75
Raw Materials.....................................................76
Packaging Materials..............................................77
Inventory Monitoring............................................77
Organization and Personnel ....................................78
Subcontractors...................................................79
Skills Training and Development...............................81
Rejects and Raw Materials Yield...............................81
Materials Inspection.............................................82
Production Process Standard..................................82
Facility Lay-out and Design.....................................83
Machines and Tools..............................................84
Production Engineering and Development...................85
Environmental Management....................................86

Value Chain Analysis.........................................................89

Structure of the Furniture Sector............................89
The Furniture Value Chain......................................91
Key Findings on the Value Chain Analysis....................91
148 State of the Sector Report - Philippine Furniture

Annexes......................................................................113
Annex 1: The Value Chain Analysis............................115
Annex 2: Furniture Product Classification by HS
and PSCC.....................................................117
Annex 3: Furniture Product Classification By Function..119
Annex 4: World Furniture Imports 2002-2004...............120
Annex 5: World Furniture Exports 2002-2004...............121
Annex 6: US Furniture Imports, by Country 2000-2004...122
Annex 7: EU 25 Furniture Imports, by Country 2000-2004123
Annex 8: Major EU25 Furniture Importers..................124
Annex 9: Philippine Furniture Exports by Product 2000-
2004...........................................................125
Annex 10: Philippine Furniture Exports by Country 2000-
2004...........................................................126
Annex 11: Summary of Key Findings From 2005 Pearl2
Survey of Furniture Firms.................................127
Annex 12: Furniture Process Flow............................137
Annex 12.1. Furniture Inbound Logistics Process Flow
Annex 12.2. Operations Process FLow
Annex 12.3. Furniture Outbound Logistics Process FLow
Annex 12.4. Furniture Marketing and Sales Process FLow
Background 149

Acronyms and Abbreviations Used

BSO Business Support Organization

BOI Board of Investments
CBI Center for the Promotion of Import from
Developing Countries
CFIF Cebu Furniture Industries Foundation
CFIP Chamber of Furniture Industries of the
Philippines
CIDA Canadian International Development Agency
CITEM Center for International Trade Expositions and
Missions
DOST Department of Science and Technology
DTI Department of Trade and Industry
ECCP European Chamber of Commerce in the
Philippines
EU European Union
ICT Information and Communication Technologies
IFMA Iloilo Furniture Manufacturers Association
ISO International Organization for Standardization
JETRO Japan External Trade Organization
PDDCP Product Design and Development Center of the
Philippines
Philexport Confederation of Philippine Exporters
Foundation
PTTC Philippine Trade Training Center
QC Quality Control
R&D Research and Development
SBGFC Small Business Guarantee and Finance
Corporation
Background 1

Background

For the past three years, the Pearl2 Project, in coordination

with the Department of Trade and Industry (DTI), has been actively
assisting various industries in the country, including the furniture
sector. Furniture manufacturing has a large employment base in
both direct and indirect workers, as well as among its suppliers
and allied industries. Despite increasing competition in the global
market, the furniture sector still brings in considerable export
revenues to the country. This study is a continuing effort of Pearl2
to provide updated information on the state of the furniture sector.
It is the third to be published by Pearl2 since 2003.
2 State of the Sector Report - Philippine Furniture

Methodology

The information used in this report is based on two years of

research and data from the various Pearl2 programs. The previous
reports in 2003 and 2004 were prepared by external consultants.
The present study builds on the work done by these advisors,
updated with additional information from both primary and
secondary sources. As before, the Project conducted surveys of
the three furniture Business Support Organizations (BSOs) covered
under the Sectoral Enhancement component of Pearl2. These are
the: (i) Chamber of Furniture Industries of the Philippines (CFIP),
(ii) Cebu Furniture Industries Foundation (CFIF), and (iii) the Iloilo
Furniture Manufacturers Association (IFMA). Areas covered by the
survey include Metro Manila, Cebu and Iloilo. The survey of these
BSO members was conducted from May to August 2005.

Secondary sources of information include reports from

government and the private sector, and online research on the
furniture industry. The value chain section of this report presents
essentially the same findings as in the previous study. The findings
in the present study are augmented by information pertaining to
the production management concerns of the industry. The reports
uses the same value chain model developed by Dr. Michael Porter
of the Harvard Business School that was presented in the previous
Background
Background 3

production and manufacturing activities, plant visits, conferences

and workshops with industry representatives. Work on the
production management assessment of the sector was conducted
from the latter part of 2004 up to early 2005.

Limitations

The respondents of the surveys used in this study are members

of furniture trade associations such as the CFIP, CFIF and IFMA.
Most respondents are furniture manufacturers and exporters.
Information on support industries such as materials suppliers and
traders is limited and was not actively sought out during the
surveys.

The value chain analysis used in the report is also limited to

the primary and support activities of the furniture sector, and
does not cover the value chains of external entities such as suppliers
or buyers. The value chain analysis does not include financial or
cost information within the industry as such data is difficult to
obtain and reconcile for an industry-level evaluation.

Data derived from secondary sources are noted as such and

presented as these were obtained except for some editing and
4 State of the Sector Report - Philippine Furniture

• Ms. Luz Suplico, Ms. Christine Paatan, Ms. Fredelita De Mesa,

Ms. Marian Boquiren and Ms. Heidi Cardeno for working
on the previous two State of the Sector Reports on
Philippine Furniture;
• Dr. Rizalito Gregorio for helping develop the furniture value
chain in the first two reports;
• Mr. Dennis Beng Hui and Mr. Jose Edgar Mutuc for working
on the Production Management Assessment on Furniture
• Ms. Ma. Rita Matute, brand manager for home furnishings
at CITEM;
• Mr. Roberto Locsin, CFIP President;
• Mr. Nicolaas De Lange, immediate Past CFIP President;
• Ms. Marlyn Siapno, CFIP Executive Director;
• Mr. Danny Eguia of the Marketing Section of CFIP;
• Mr. Michael Basubas, CFIF President;
• Mr. Jay Yuvallos, immediate past CFIF President;
• Ms. Ruby Salutan, CFIF Executive Director;
• Ms. Rosemel Calderon, Information Center Manager of CFIF;
• Ms. Gemma Larraga-Lee, IFMA President;
• Ms. Marianne Tajanglangit, IFMA Executive Director
• and the other officers and members of these associations
for their support in providing data for this report.
Background 5

Executive
Summary

Furniture manufacturing in the Philippines is a highly labor

intensive industry; workers are directly employed by producers,
subcontractors, raw materials suppliers and firms in allied
industries. Estimates from the Department of Trade and Industry
place total furniture makers in the country at 15,000 employing
about 481,500 direct workers and another 300,000 more among
the subcontractors. About 98% of firms in the sector are micro,
small and medium sized operations.

The global demand for furniture in 2004 amounted to an

estimated US$79.5 billion (based on UN data). The largest market
for furniture is still the United States which accounted for more
6 State of the Sector Report - Philippine Furniture

Philippine furniture exports amounted to US$294 million in

2004. The largest market is still the United States where almost
two thirds (65%) of total industry exports go. Major product lines
exported are wood and rattan furniture which comprise about 77%
of total furniture exports in 2004.

Compared to competing countries in Asia, local furniture

exports have not performed well in the past years. In the vast
U.S. market, the country’s furniture exports is only about 1% of
total U.S. furniture imports and the Philippines is now even behind
Vietnam in terms of supplying furniture to U.S. based buyers. Over
the past few years, exports of Philippine furniture have remained
erratic, averaging a negative growth of almost 6% yearly from
2000 to 2004. The country has not yet been able to push exports
back up to levels reached at the start of the decade when exports
reached US$381 million.

The furniture industry faces persistent issues and concerns in

raw material supplies and generally low productivity which has
reduced the competitiveness of local furniture in the global market.
There is a lack of R & D and information on alternative wood
species that could ease the supply constraint on wood for the sector.
Manufacturing processes are still mainly manual with some
mechanization. There is a lack of investments in modern machinery,
Executive Summary
Background 7

Worker productivity both at the exporter and subcontractor

levels needs significant improvement. Given the heavy use of
subcontractors in the industry, a lot of intervention needs to be
undertaken at this level to improve the quality of their work.
Standards for materials, processes, equipment and related factors
also need to be set to improve quality control.

Product design and development remain a strength of the

industry. The sector has creative and innovative designers who
can manipulate various materials into furniture designs. However,
there is a need to improve the link between design and production
to ensure that the final products are economical to produce. Designs
also need to be more market-driven, and based on up-to-date
information on product and market trends, especially in the major
countries where local furniture is exported. The sector also needs
to undertake more market development work to seek out new
countries and buyers rather than remain dependent on the U.S.
market.

For the immediate term, the domestic furniture sector needs

to recover lost market share. Firms should continue to shift their
strategy to target the medium to high end markets and avoid
competing on price where China, Vietnam and other low cost
producers have the advantage. Together with this strategy, new
8 State of the Sector Report - Philippine Furniture

Furniture producers also need to pay closer attention to the

domestic market. Over the past years, imports of furniture from
low cost manufacturers abroad have increased, which led to
intensified competition. The industry needs to simultaneously
develop its local and export markets, as manufacturers can be
more flexible in their pricing for exports if they have a good
domestic market base to absorb some of their overhead and fixed
costs.
Background 9

Industry
Overview
Product Coverage

The furniture industry uses a wide range of materials — wood,

rattan, metal, bamboo, plastic, buri, stone — singly or in
combination. Most products can be classified as either leg items
such as beds, tables and chairs; case goods, including cabinets
and chests of drawers or building and home fittings. Furniture
products can also be classified according to function, i.e., for
dining, the kitchen or living room, or upholstered and non-
upholstered furniture. There are codes used to classify furniture
items used both locally and internationally. Annex 2 lists down two
sets of codes used for the classification of furniture while Annex 3
presents furniture classification by function. For this report,
coverage of furniture products usually refer to those items classified
under HS codes 9401 and 9403.
10 State of the Sector Report - Philippine Furniture

local furniture products in the global market. This situation spurred

the exploration of other materials for use in furniture and eventually
led to the development of various products from wood, metal,
stone, bamboo and mixed media.

Over the succeeding years, wood and metal furniture evolved

and became bestsellers of the industry. Originally, manufacturers
were shipping out only sanded items and parts for wood furniture.
Gradually, firms expanded their capabilities and manufacturers
are now exporting finished products that showcase the Filipino
skill in carving, marquetry and inlay. Wooden furniture draws from
diverse themes and styles, from reproductions to modern and
contemporary items. There are also manufacturers using
particleboard and medium density fiberboard for panel furniture.
Metal furniture usually features designs with mixed media including
wicker, wood and seagrass accents. Furniture from other materials
have also emerged as producers developed their product lines.
These include stone furniture and tabletop items. Local
manufacturers often produce furniture for exports considered
either as classical or contemporary designs.

Industry Coverage

An estimated 15,000 companies comprise the local furniture

Background
Industry Overview 11

The three major furniture production areas in the Philippines

are Metro Manila, Pampanga and Cebu. Located in Metro Manila
are the large producers of wooden furniture and the SMEs that are
using mixed materials. Pampanga is associated with hand-carved
furniture. The nearby province of Bulacan is known for its inlay
work. Furniture manufacturers in Pampanga and Metro Manila sell
to both the local and foreign markets. Producers in these areas
are part of CFIP, the national furniture makers association with
chapters in various regions of the country.

Cebu used to be known for furniture made from rattan and

fossilized stone. The shortage of rattan, however, prompted several
manufacturers to shift to wood, and Cebu is now better known for
wooden furniture. Cebu manufacturers also use seaweed, hemp,
arorog, coconut palm, bamboo and beaten iron in their products.
The region reportedly contributes about 60% of the country’s total
furniture exports, even though only about 20% of the country’s
furniture companies are based here. Cebu’s strengths are its good
port facilities and a well-developed entrepreneurial class. Many
furniture makers in Cebu are exporters and most are members of
CFIF, the Cebu based furniture association.

Furniture manufacturers in Iloilo started with bamboo, which

is an environmentally friendly raw material. At present, however,
12 State of the Sector Report - Philippine Furniture
Background 13

Global
Furniture
Market
World Imports of Furniture

World imports of furniture over the three year period of 2002

to 2004 show a peak in demand in 2003 when global imports
amounted to US$83.5 billion. This was a significant increase of
almost 20% from imports recorded in 2002. However, In 2004,
global furniture demand weakened with world imports reaching
US$79.5 billion, down by about 5% from the 2003 level.
14 State of the Sector Report - Philippine Furniture

Chart 1: World Furniture Imports, 2002–2004

(in US$ million)

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

-
2002 2003 2004

Import Value 69,641 83,489 79,516

Note: Figures for the above chart cover furniture classified under HS item
nos. 9401 and 9403. See Annex 1 for details on these codes.

Source: UNSD Comtrade Database

The United States remains the largest single market for

furniture. In 2004, U.S. furniture imports totalled US$29 billion,
representing more than a third of world demand for the year. Over
the three year period from 2002 to 2004, U.S. imports of furniture
Background
Global Furniture Market 15

Chart 2: World Furniture Imports, by Major Country, 2004

(in percentage share to total global imports)

Switzerland
Canada Japan Belgium 2.5%
France Austria
4.9% 4.7% 3.2%
7.1% 2.3%
United Kingdom OTHERS

8.8% 19.4%

Germany
10.6%
USA
36.6%

Note: Data for the above chart cover furniture classified under HS item
nos. 9401 and 9403. See Annex 1 for details on these codes.

Source of basic data: UNSD Comtrade Database

All major furniture importing countries showed respectable

double digit growth in their demand from 2002 to 2004. The United
Kingdom and France showed the largest increase in furniture
imports, averaging 26% and 22% yearly respectively during the
period.
16 State of the Sector Report - Philippine Furniture

Chart 3: World Furniture Imports, by Major Country,

2002-2004
(in US$ million)
30,000

25,000

20,000

15,000

10,000

5,000

OTHERS
United Kingdom

France
Germany

Canada

Belgium
Japan
USA

Austria
Switzerland
-

2002 2003 2004

Note: Data for the above chart cover furniture classified under HS item
nos. 9401 and 9403. See Annex 1 for details on these codes.

Source of basic data: UNSD Comtrade Database

Please see Annex 4 for details on the world furniture imports

for 2002 to 2004.
Background
Global Furniture Market 17

Chart 4: Major Furniture Exporters, 2004

(in percentage of total global exports)

France Malaysia Belgium

USA 3%
4% 3%
Poland 7%
OTHERS
7% 27%
Canada
8%

Germany
10% Italy
China 16%
15%

Note: Data for the above chart cover furniture classified under HS item
nos. 9401 and 9403. See Annex 1 for details on these codes.

Source of basic data: UNSD Comtrade Database

China Furniture Exports

Exports of furniture from China showed sustained and rapid

18 State of the Sector Report - Philippine Furniture

Chart 5: China Furniture Exports, 2000-2004

(in US$ million)

12,000

10,000

8,000

6,000

4,000

2,000

0
2000 2001 2002 2003 2004
Export Value 3,565 3,958 5,359 7,296 10,168

Note: Data for the above chart cover furniture classified under HS item
nos. 9401 and 9403. See Annex 1 for details on these codes.

Source of basic data: UNSD Comtrade Database

The furniture industry in China is composed of some 51,000

manufacturers providing employment to approximately 45 million
people. It is concentrated in the southern provinces, particularly
in Guangdong. About half of the country’s furniture exports
reportedly originate from this province. Beijing and Shanghai also
Background
Global Furniture Market 19

About half of China’s furniture exports goes to the United

States (based on UNSD Comtrade Database). In 2004, China
exported some US$5 billion worth of furniture to the U.S. market.
Other major buyers of Chinese furniture include Japan (8% of total
2004 Chinese furniture exports), the United Kingdom (5%), Canada
(3%) and Germany (2%).

U.S. Furniture Imports

Furniture imports of the United States reached some US$26

billion in 2004. Except for a slight decline in 2001, furniture imports
of the U.S. were generally rising from 2000 to 2004, averaging a
yearly growth of about 10% during the period. Please see Chart 6
below.

Chart 6: Furniture Imports of the United States, 2000-2004

(in US$ million)

30,000

25,000

20,000

15,000
20 State of the Sector Report - Philippine Furniture

For the first ten months of 2005, the U.S. Bureau of Commerce
reports that imports for furniture had already reached almost US$24
billion.

China is the single largest supplier of furniture to the United

States. In 2004, the U.S. imported about US$10 billion worth of
furniture from China, representing almost 37% of total U.S.
furniture imports for the year. Other notable suppliers include
Canada (19% of total U.S. 2004 furniture imports) and Mexico
(16%). Please see Chart 7 below.

Chart 7: U.S. Furniture Imports, by Country, 2004

(in percentage of total furniture imports)

Indonesia Thailand
Italy Taiwan Malaysia
2% 2%
Mexico 5% 3% 2% Brazil
16% 2% OTHERS
12%

Canada
China
19%
37%
Background
Global Furniture Market 21

It is worth noting that among the major furniture suppliers to

the U.S. market are four other Asian countries besides China.
These are Taiwan, Malaysia, Indonesia and Thailand. Table 1 below
shows the relative ranking of the major furniture suppliers to the
United States as of 2004.

Table 1: U.S. Furniture Imports, 2004, by Country

(in US$’000)

Country Import Value % Share

China 9,919,189.0 37.6

Canada 4,923,218.0 18.7

Mexico 4,210,430.0 16.0

Italy 1,218,336.0 4.6

Taiwan 737,965.0 2.8

Malaysia 636,919.0 2.4

Indonesia 542,086.0 2.1

Thailand 475,818.0 1.8

Brazil 404,637.0 1.5

22 State of the Sector Report - Philippine Furniture

European Union Furniture Imports

Imports of furniture by the 25 member European Union (EU25)

totalled almost Euros 32 billion in 2004. Over the period 2000 to
2004, growth in the EU25 furniture imports has been modest but
steady, averaging about 4% yearly. Please see Chart 8 below.

Chart 8: Furniture Imports of EU25 Countries,

2000-2004 (in Euro Billions)

35.00

30.00

25.00

20.00

15.00

10.00

5.00

0.00
2000 2001 2002 2003 2004
Import Value 26.31 27.16 28.05 28.87 31.62

Note: Data for the above chart cover furniture classified under HS item
nos. 9401 and 9403. See Annex 1 for details on these codes.

Source: Export Help Desk, External Trade, European Commisison

Background
Global Furniture Market 23

Chart 9: Furniture Imports of EU25 Countries, by Country of

Origin, 2004
(as percentage of total EU25 imports)

OTHERS
39%
Italy
Belgium 14%
3%

Czech Republic
3% Germany
Spain 14%
3% China Poland
Denmark France 9%
8%
3% 4%

Note: Data for the above chart cover furniture classified under HS item
nos. 9401 and 9403. See Annex 1 for details on these codes. The above
chart shows the countries of origin of EU25 furniture imports.

Source: Export Help Desk, External Trade, European Commisison

Chart 10: Furniture Imports from China of EU25 Countries,

2000 to 2004
(in Euro Billions)

3.00

2.50

2.00
24 State of the Sector Report - Philippine Furniture

The largest importers of furniture among the EU25 countries

are Germany (22% of total EU25 imports), United Kingdom (18%),
France (14%), Belgium (6%) and the Netherlands (6%). Chart 11
below shows more details.

Chart 11: Major Furniture Importers Among EU25 Countries, 2004

(in percentage to total EU25 furniture imports)

Sweden
Austria Italy
4% Others
Spain 5% 4%
16%
5%
Netherlands
6%
Belgium
6%

France
14% Germany
UK
22%
18%

Note: Data for the above chart cover furniture classified under HS item
nos. 9401 and 9403. See Annex 1 for details on these codes.

Source: Export Help Desk, External Trade, European Commisison

The fastest growing markets for furniture imports are

Background
Global Furniture Market 25

Chart 12
Fastest Growing Importers of Furniture Among EU25
Countries, 2000-2004

30.00%

25.00%
Average Growth Rate

20.00%

15.00%

10.00%

5.00%

0.00%
Lithuania Malta Slovakia Greece Slovenia Spain
Growth Rate 25.62% 25.17% 23.85% 16.90% 16.78% 15.79%

Note: Data for the above chart cover furniture classified under HS item
nos. 9401 and 9403. See Annex 1 for details on these codes. Growth rate
refers to the average from 2000 to 2004

Source: Export Help Desk, External Trade, European Commisison

Exports of Philippine Furniture

26 State of the Sector Report - Philippine Furniture

Chart 13: Philippine Furniture Exports, 2000-2004

(in US$ FOB)

400000000

350000000

300000000

250000000

200000000

150000000

100000000

50000000

0
2000 2001 2002 2003 2004
Year
Source: Department of Trade and Industry

Wood and rattan products continue to remain as the major

product lines exported, collectively comprising more than three
fourths of total industry exports in 2004 as shown in Chart 14 on
the next page. Other notable export lines include metal furniture
and parts of furniture.

From 2000 to 2004, the fastest growing export line for the
Background
Global Furniture Market 27

Chart 14: Philippine Furniture Exports by Product, 2004

(as percent of total furniture exports)
Stone Furnishings Buri
3% 1% 0%
Furniture Parts Bamboo Plastic Furniture Of
Metal 7% 1% 0% Other Materials
10% 1%

Wood
Rattan
44%
33%

Source: Department of Trade and Industry

The local furniture industry is still heavily dependent on the

United States market for foreign sales. In 2004, exports of furniture
to the U.S. accounted for almost two thirds of total industry exports
as shown in Chart 15 below. Annex 10 shows additional data.
Chart 15: Philippine Furniture Exports by Country, 2004
(in percent to total furniture exports)
Australia
Italy Saudi Arabia
2%
2% 2%
28 State of the Sector Report - Philippine Furniture

Although the U.S. is the largest market for Philippine furniture,

the industry’s exports to the U.S. is still behind those from other
Asian countries. Table 2 below shows the levels of U.S. furniture
imports from selected Asian countries in 2004. China dominates
the U.S. market but other countries including Taiwan, Malaysia,
Indonesia, Thailand and Vietnam are also ahead of the Philippines.

Table 2
U.S. Imports of Furniture from Selected Asian Countries,
2004
(in US$ ‘000)

Value of U.S. % of Total U.S.

Country
Furniture ImportsFurniture Imports

China 9,919,189 37.65%

Taiwan 737,965 2.80%

Malaysia 636,919 2.42%

Indonesia 542,086 2.06%

Thailand 475,818 1.81%

Vietnam 384,443 1.46%

Philippines 294,195 1.12%

Background
Global Furniture Market 29

Looking at the trend of U.S. furniture imports from various

Asian countries from 2000 to 2004, most posted positive growth
rates for the period; Vietnam’s furniture sales to the U.S. in
particular, increased by an average of almost 200% yearly. Furniture
imports of the U.S. from Vietnam expanded by forty three times
from 2000 to 2004. Only Taiwan and the Philippines showed generally
negative growth during the period in terms of furniture sales to
the U.S. Please refer to Table 3 below for details.

Table 3
U.S. Imports of Furniture from Selected Asian Countries,
2000-2004
(in US$ million)
Ave.
Yearly
Growth
Country 2000 2001 2002 2003 2004 Rate (%)

China 4,119 4,665 6,471 8,096 9,919 24.90%

Taiwan 1,026 762 789 739 738 -7.16%

Malaysia 492 431 496 531 637 7.43%

Indonesia 492 496 539 523 542 2.56%

Thailand 299 297 380 400 476 12.86%

Vietnam 9 13 80 186 384 196.25%

30 State of the Sector Report - Philippine Furniture

In the European Union market, the Philippines similarly lags

behind other Asian countries in terms of furniture exports. As
shown in Table 4 below, the country ranked ninth in 2004 among
the Asian countries that the EU25 members imports furniture from.
China is the lead Asian supplier of furniture to the EU followed by
Indonesia.

Table 4
Imports of Furniture from Selected Asian Countries by EU25
Members, 2004
(in Euros ‘000)

EU25 Furniture % of Total EU25

Country
Import Value Furniture Imports

China 2,657,755 8.50%

Indonesia 830,710 2.66%

Vietnam 447,129 1.43%

Malaysia 337,065 1.08%

Taiwan 259,302 0.83%

Thailand 233,477 0.75%

India 158,912 0.51%

Japan 84,212 0.27%

Background 31

Sectoral
Profile
As in the previous reports, Pearl2 conducted a survey of
furniture firms to gather data on the status of the industry. A total
of 137 respondents participated in the survey conducted in the
third quarter of 2005. This number is about 59% more than the 86
firms surveyed in 2004 and more that double the 52 companies
who joined the 2003 survey. The present sample represents about
24% of the combined membership of the three furniture BSOs
covered by the survey. The geographic distribution of the 137
respondents are as follows: 56 (41%) in Manila, 72 (52%) in Cebu
and 9 (7%) in Iloilo. All respondents are members of either CFIP,
CFIF or IFMA.

An overview of the survey results is presented first in this

section covering all respondents. Thereafter, the key results are
32 State of the Sector Report - Philippine Furniture

Overview of Survey Findings

Most respondent furniture firms (77%) are either medium or

small in size. The rest are mainly micro with a few large firms.
About three fourths are corporate in structure. Business premises
are usually large with 92% of surveyed companies having work
areas of over 250 sq. m. Most companies surveyed have been in
the business for a number of years with a significant proportion
(38%) in operations for more than ten years. There are more firms
owned by men than by women. About 62% of sole proprietors are
male while men account for 72% of corporate chair persons.

Employees of the 137 companies surveyed total about 15,395.

Production workers and supervisors comprise almost 80% of all
personnel. Personnel in various staff positions (marketing,
technical, etc.) comprise about 15% of all workers. Management
level personnel account for the remaining 5%.

Overall, male employees outnumber female workers at a ratio

of almost 2:1. Women outnumber men only in marketing and
administrative positions. At the management level, there is an
almost equal distribution of men and women personnel. Wage rates,
however, do not differ much between male and female workers
with both averaging a monthly salary of around Php6,674 or about
Background
Sectoral Profile 33

Few respondents employ a fully mechanized operation, most

rely on manual or semi-mechanized processes. About 92% of firms
use a manual mode of packaging. An almost equal proportion (90%)
also utilize manual means of quality control. Materials handling is
done manually by 70% of respondents. Most firms (58%), however,
use a semi-mechanized mode of production.

Capacity utlization rates among respondents averaged about

88% during the time of the survey. Space, equipment and personnel
limitations top the list of reasons for underutilized capacity. About
three fourths of companies surveyed source their raw materials
locally.

Most firms (63%) encounter quality problems in their production

process. Another 37% reported problems in raw materials quality.
Few companies (9%) use outside testing facilities to aid their quality
control system. Most (61%) rely on assigned personnel to do quality
control work.

A large majority of respondents (86%) rely on their internal

resources and capabilites for product design and development.
Some 68% have their own R & D capability. Nine out of ten
respondents base their design on buyer specifications. Aside from
buyers, other common sources of product design information are
34 State of the Sector Report - Philippine Furniture

Close to three fourths of respondents rely on trade fairs for

market promotions. Half use brochures while 40% utilize the
internet for marketing. Trade fairs are also a main source of foreign
buyers. Other sources are through contacts, referrals and business
missions.

Annual export sales for most respondents (92%) are US$3 million
and below, with 8% selling in the US$3 million range and above.
Please see Chart 16 below for details.

Chart 16: Distribution of 2005 Furniture Survey

Respondents, by Amount of Export Sales
(in US$)

More than 3M Under 50K

8% 13%
More than 50K to 100K
More than 1M to 3M
11%
22%

More than 500K to 1M More than 100K to 300K

11% 18%
More than 300K to 500K
17%

Note: There were 121 firms who provided responses on their export sales.
The sales of firms refer to their exports for the year 2004 since this survey
was conducted in the middle of calendar year 2005.
Background
Sectoral Profile 35

Most firms (86%) point to China as their main competitor in

the global market. Other major competitors include Thailand,
Vietnam and India. Low prices and cost was indicated by three
fourths of respondents as the main advantage of the country’s
competitors abroad. About 25% of firms also said quality and design
is a key point of competition.

Local sales are still generally low among surveyed companies.

More than half (55%) have domestic sales below Php3 million
annually with 30% selling less than Php1 million a year. Please see
Chart 17 below for details.

Chart 17: Distribution of 2005 Furniture Survey

Respondents, by Amount of Local Sales
(in Php)

More than 30M to 50M

More than 20M
5%
More than 25M to 30M 3%
6% Under 1M
More than 15M to 25M 31%
6%

More than 10M to 15M

8%

More than 5M to 10M

5%
More than 1M to 3M
36 State of the Sector Report - Philippine Furniture

Domestic sales are also heavily dependent on Metro Manila as

80% of respondents indicated generating market revenues in this
area. Local marketing channels are mainly through direct selling
(used by 71% of respondents), while close to a third of companies
(32%) also have their own stores.

Slightly more than half (51%) of respondents’ budget go to

production. Some 20% is used for administrative expenses while
the rest is shared by marketing, R & D and other costs. Majority
(85%) of companies continue to rely on their own funds for their
operations. Another 42% reported having a credit line with banks.

Most firms surveyed indicated that they have not received

assistance from external groups. About 84% said that they have
not been assisted by a donor group while 88% indicated that they
have not received any assistance from a government agency.

Metro Manila Key Survey Findings

Date of Establishment
Background
Sectoral Profile 37

Company Setup

By size, the largest segment of respondents (61%) is composed

of medium scale firms. Small and micro enterprises comprise the
rest of the total, representing 29% and 11% respectively. Meanwhile,
75% of the total sample firms for this year are organized as
corporations and 23% are single proprietorships.

In 2004, majority of the companies surveyed were either small

or medium scale in size (47% and 40% respectively). Compared to
last year's study, there is a drop in the percentage of firm organized
as corporations (83% last year) and rise in sole proprietorship (17%
last year).

Ownership and Management

In sole proprietorship businesses, there is an uneven proportion

in gender ownership as a total of 69% of all business are owned by
men, the rest (31%) by women. All of these business owners have
received college education, with a significant share (23%) even
having postgraduate degrees.

In corporations, there is also a predominance of males (74%)

among the chairpersons. An even higher ratio exists among the
38 State of the Sector Report - Philippine Furniture

Last year, males also dominated corporate respondents

accounting for 77% of Chairpersons and 70% of Presidents. However,
most (60%) of sole proprietorship businesses surveyed last year
were owned by women and only 40% by men.

In 2004, almost all of the business owners in single

proprietorship received formal education, 80% having been in
college or received postgraduate units and 20% received high school
education.

Product Line

Metro Manila producers have a very varied product line-up.

The most common items manufactured were bed and bedroom
products, made by approximately 10% of the total respondents.
Other household items such as accessories, furnishings, cabinets,
lamps and doors were also part of the product line-up. Many firms
also concentrate on making products for a specific target market
such as companies that cater to hotels, restaurants or those which
specialize at bedroom furnishings. Compared with the 2004 report
where majority of the producers focused on leg items such as
tables and chairs, this year’s product line seems more diversified.

Facilities
Background
Sectoral Profile 39

Slightly more than half of the establishments (52%) rent their

business areas; 41% own their business space. Among respondents,
about 5% both owned and rented property. About 79% of the firms
are located in commercial areas, 11% are in residential sites, and
5% are in industrial locations.

Employment

The 56 respondents from Metro Manila account for a total

direct employment of approximately 6,115 workers. Of these, 66%
are male and the remaining 34%, female. A large portion of the
workforce is in production (79%); 5% have office and administrative
functions; 3% in quality control; 3% are assigned to marketing and
2% function as technical staff.

The average wage rates of employees do not have much

difference between male and female workers, averaging Php7,860
per month or Php357 daily. This shows a notable increase in the
wages received by furniture sector staff, which charted daily wages
of Php250 to Php300 in 2004.

The production (70% male), technical (85% male) and quality

control (65% male) staff are predominantly comprised of men.
There is female dominance only for marketing (54% female) and
40 State of the Sector Report - Philippine Furniture

Subcontractors

Majority of the companies surveyed (approximately 71%) use

subcontractors; only about 29% of the respondents do not. The
average amount of work subcontracted by Metro Manila companies
is 31%, compared to 45% in 2004. Companies usually deal with
about 5 subcontractors a year, and the average number of workers
per subcontractor is 18.

The bulk of the work subcontracted is at the production stage.

Most of the subcontractors hired by Metro Manila companies are
based within the same province (53%) or the same region (40%).

The leading problem with subcontractors, according to

respondents, is the subcontracting firm’s reliability. The main forms
of assistance provided to subcontractors are in the areas of skills
training and product development.

In the previous report, 83% of the firms subcontracted their

work. Similarly, most of the work subcontracted was at the
production stage. Firms last year had an average of 10
subcontractors each.

Sources of Raw Materials

Background
Sectoral Profile 41

Mode of Production and Operation

About 25% of Metro Manila respondents are semi-mechanized

and only 3% are fully mechanized. Most (72%) are predominantly
manual in operations. In last year’s survey, 56% of firms were
semi-mechanized and 44% were manual.

Packaging and quality control continue to be predominantly

manual with 95% of respondents having this setup. Some 73% of
surveyed firms also employed manual means of materials handling.
It was only in production operations where most firms (57%) used
a semi-mechanized setup. Fully mechanized processes were
employed by only 4% of firm in materials handling and by 9% in
production.

Capacity Utilization

Only about two-fifths (39%) of the companies surveyed reported

operating at full capacity at the time of the survey. Around 20%
reported capacity usage of 80% to 98% while 23% operated at
anywhere from 50% to 75% of their capacity. About 14% stated zero
utilization rate during the survey. The rest had capacity utilization
of about 40%. Average capacity usage for all Metro Manila
respondents is about 86%. Space and equipment limitations were
42 State of the Sector Report - Philippine Furniture

Quality Control

More than half of respondents (57%) have a standard set of

procedures to follow in order to maintain quality control. About
52% also have specifically designated personnel for quality control
activities, which is a notable rise from last year’s survey where
only one-third said they had dedicated personnel for Q.C. About
11% rely on external testing facilities to ensure product quality.

Production process (cited by 50% of respondents) and raw

materials supply (39%) are the foremost problems encountered in
quality control activities. These findings are similar to those in
last year’s survey.

Product Development

About 82% of the companies surveyed rely on their own

capabilities and resources for product development; more than
half (52%) use outside parties. The figures show a marked increase
in the utilization of internal resources by respondents from last
year’s survey (only 43% in 2004), and also in the use of external
facilities (only one respondent in 2004).

The top sources of information for product development are

Background
Sectoral Profile 43

A little more than half (55%) do not think that they have enough
information from the current sources for product development.
Last year, 45% of firms surveyed were dissatisfied with their
present information sources for product design.

Market Coverage

The proportion of exports to total sales is about 73% for the

surveyed firms. For about 59% of respondents, at least half of
their sales are exported. Production at 16 firms (29%) is completely
for export purposes. Last year, exports comprised about 79% of
the sales of respondents.

Exactly 25% of the firms surveyed distribute exclusively to the

local market, which is a remarkable increase from only 3% of
respondents in 2004 who only sold locally. About 90% of the
respondents’ local sales go to the Metro Manila area, a proportion
similar to last year’s survey finding.

Most firms in Metro Manila (73%) target the high end market
segment while 52% also sell to the mid range segment. Only 7%
said that they target the low end market. Last year, only about
20% of firms surveyed targetted the high end market exclusively.
44 State of the Sector Report - Philippine Furniture

The main source of export orders is by participation in

international trade fairs, which 64% of surveyed firms cited as
their main marketing activity. Other significant sources of buyers
are the respondents’ own contacts (50%), referrals (39%) and
business missions (21%). The same sources were noted in the
previous report last year.

Marketing Channels and Activities

Majority (75%) of furniture makers in Metro Manila undertake

direct selling to gain buyers. About 40% have their own stores and
15% sell their products through traders. A further 15% are linked
with department stores locally.

Trade fairs remain the main marketing tool to secure foreign

buyers for majority of the respondents (88%). About 66% of firms
surveyed also produce their own brochures and product catalogues,
while almost half (48%) use the Internet for marketing. These
results closely follow those in last year’s report.

Competitors

China continues to be viewed as the main competitor in the

global market by 42% of surveyed firms in Metro Manila. Other
Background
Sectoral Profile 45

Sales

For export sales, 5 firms (12%) reported revenues of over

US$3 million. Some 17% of respondents sold below US$50,000 in
exports and an identical proportion exported between US$50,000
and US$100,000. Four firms or 10% sold from US$1 million to US$3
million. The remainder sold between US$100,000 and US$1 million.
About 2% did not give any response on their export sales.

In last year’s survey, one firm exported over US$5 million worth
of furniture while most respondents (60%) sold below US$500,000.
Another 30% of firms exported between US$500,000 and US$3
million.

For local sales, about 18% of firms sold less than Php1 million.
The largest proportion of the total respondents (23%) posted local
sales of Php1 million to Php3 million. About 12% sold in excess of
Php30 million. The rest had varying domestic sales levels; 15% had
sales from Php3 million to Php10 million, 8% with sales from Php15
million to Php25 million and 8% with sales from Php25 million to
Php30 million. Two respondents did not give any answer.

Last year, 23% of surveyed firms reported revenues of less

than Php1 million, about 20% had local sales of Php5 million to
46 State of the Sector Report - Philippine Furniture

Finance

Furniture companies surveyed in Metro Manila allocate 57% of

their total budget for production activities. Administrative costs
are allocated about 21%; marketing and R&D follow with 13% and
8% respectively. These reflect the same trend as in the previous
year’s report although the proportion of funds allocated for
administrative and finance was lower last year (17%) and the money
for R & D was higher (11%).

The industry has two main sources of funds: (1) their own
funds, of which 84% rely on, and (2) bank credit, which are availed
by 34% of surveyed Metro Manila companies. These trends were
the same as in last year’s survey.

Source of Assistance

Only about 11% of the respondents received assistance from

donor agencies in the past decade. Among the donor agencies
mentioned are CIDA (17% through Pearl2), CBI (17%), JETRO (17%),
and Philexport (17%).

Only 9% of respondents said they obtained assistance from a

goverment agency. Among the more commonly cited agencies are
Background
Sectoral Profile 47

Cebu Key Survey Findings

Date of Establishment

Of the total 72 firms in Cebu that were surveyed for this study,
82% have been in operation on or before year 2000. Most
respondents (33%) are between 6 to 10 years old. A further 22%
are aged between 16 to 20 years. Only 7 companies (10%) have
existed for less than 5 years.

Company Setup

Majority of Cebu businesses surveyed are small and medium

scale enterprises; each category comprise 38% of the total
respondents. About 14% can be classified as large ventures, while
a minimal 4% exist as micro businesses. The remaining fraction
did not answer the query.

The previous survey showed similar information; small (43%)

and medium sized (36%) enterprises made up the majority of Cebu
companies, and micro- and large-scale ventures comprised 11%
and 7% of respondents respectively.
48 State of the Sector Report - Philippine Furniture

In corporations, most chairpersons (71%) are male. About

56% of chairpersons are college graduates with 8% also having
post graduate degrees. A significant number (39%) did not indicate
their educational attainment. Three fourths of all the Cebu
companies covered by the study have a male President. A large
majority (93%) of the Presidents are college graduates and 12%
also did post graduate studies.

Among other management positions, the proportion of males

was only slightly higher than that of females (52% men vs. 48%
women).

The previous report showed a parallel pattern of men

dominating ownership of the surveyed firms, among sole
proprietorships (70%) and corporate chairs (82%). Men also
comprised 82% of company Presidents. Owners and leaders of
companies generally have a solid educational background, most
(70% to 75%) possessing college degrees and a smaller proportion
having done post graduate studies.

Product Lines

Cebu manufacturers commonly produce furniture made of

either rattan or wood. Leg items such as cabinets, chairs and
Background
Sectoral Profile 49

Majority of the companies are located in commercial areas

(74%), and the rest are located either in residential or industrial
areas. These results are consistent with last year’s findings.

Employment

The 72 Cebu based firms included in this year’s study employ

a total workforce of 8,934 people, 63% of which are males. The
production staff has the most number of employees with 79% of
the total. Administrative staff comprises 8% of the total workforce,
followed by quality control (5%), technical staff (4%) and marketing
staff (2%). The remainder is occupied by management personnel.

Marketing (65% female) and administration (60% women) are

the only female-dominated departments.All other sections were
dominated by men including production (66% male), technical staff
(79%) and quality control (62%).

In the previous survey, 44 respondents in Cebu reported a

total of 4,576 direct employees. About 58% of the total staff were
male and 42% were female. Men were also predominant in the
various departments except marketing and administration.

The average wages employees receive are generally the same

50 State of the Sector Report - Philippine Furniture

Subcontractors

Majority of the Cebu-based companies (82%) acquire the

services of subcontractors. Firms outsource almost half (48%) of
their total work to these firms. On the average, a furniture business
in Cebu employs 11 subcontracting firms in one year, each with
about 36 workers of their own.

About 92% of the subcontractors hired by Cebu businesses are

based within the province itself. Approximately 81% of the work
subcontracted is in production, followed by finishing at 29% and
pre-production at 27%.

The most common problems that Cebu companies encounter

with subcontractors are the quality of work and delivery dates.
The primary areas with which subcontractors are given assistance
are credit, tools and product development.

Last year, 95% of Cebu respondents subcontracted work with

an average of 54% of the work outsourced. The average number
of subcontractors per respondent was the same as in this year’s
survey. Problems and assistance to subcontractors also remained
essentially the same.
Background
Sectoral Profile 51

Mode of Production and Operation

Majority (70%) of Cebu business processes rely on manual

operations. About 26% are semi-mechanized, 1% is fully
mechanized, and about 3% did not provide a response to the
question. Except for production operations where 57% of
respondents reported having semi-mechanized systems, the other
processes were mainly manual including packaging (89% manual),
quality control (88%) and materials handling (67%).

The information reflects a change in trend from last year’s

findings, when more than half of respondents (59%) reported semi-
mechanization, and only 34% relied on manual labor. About 7% had
fully mechanized production lines.

Capacity Utilization

Approximately 49% of the companies reported operating at

full capacity at the time of the survey. This shows a notable increase
from the proportion of 27% fully utilized firms posted last year.
Almost one-fourth, however, are operating below 50% of capacity.
This is up from last year’s 16% who reported working at less than
half capacity. Overall capacity utilization for all respondents average
about 90% during the time of the survey. Main reasons cited for
52 State of the Sector Report - Philippine Furniture

noticeable increase in the percentage of firms following a set of

standards for quality assurance. From 18% in the previous report,
46% of the companies surveyed are now following specific Q.C.
protocol. Only 10% of respondents used external facilities for quality
control.

The primary problem encountered in quality control is in

production, with 78% of the companies having issues in this area.
Raw materials and supplies (36%) also posed a major bottleneck in
the Q.C. operations of the firms.

Product Development

Cebu companies are now maximizing the use of their internal

capabilities to develop their products. About 88% of the companies
utilize their own resources in product development, up from 43%
last year. About 21% engage external resources for the same
function.

The main sources of information Cebu firms use for product

development are buyers (65%), designers (58%) and trade fairs
(44%). Almost three-fourths also have their own R&D department.
A little more than half (54%) believe that they have enough
information for satisfactory production, and 42% do not. The
Background
Sectoral Profile 53

Market Coverage

On the average, 95% of Cebu firms’ sales consist of exports.

About 71% of firms surveyed sell exclusively to the export market.
Only 26% sell domestically and local sales remain minimal among
respondents. For firms that sell locally, domestic sales account for
50% or less of total sales. Local sales comprise only 20% or less of
their revenues for 16% of respondents.

Respondents target either the high end (60% of firms) or middle

segment (56%) of the market. Only one firm indicated targeting
the low end.

Last year, slightly more than half (54%) of total respondents

exported all of their products, and for about one-third of firms
surveyed, local sales accounted for 20% or less of total sales.
Overall, exports averaged about 91% of the total sales of firms
surveyed last year.

Export Markets

The major export markets of Cebu are the United States (72%),
Europe (48%), the Middle East (45%), other Asian countries (31%)
and Australia (29%). About 18% of respondents sell only to the
54 State of the Sector Report - Philippine Furniture

Marketing Channels and Activities

The main sources of Cebu companies for foreign buyers are

their own contacts (61%), trade fairs (56%) and referrals (32%).
International trade promotions are primarily done in trade fairs
(63%), releasing their own brochures and catalogues (40%), the
Internet (39%) and business missions (25%).

Majority of firms (84%) still market abroad through importers.

Other export channels used include distributors (33%) and chain of
stores (22%). Locally, 60% of firms undertake direct selling, about
15% have their own stores, and another 15% engage with other
traders. Ten percent do business with department stores.

Last year, most companies (82%) attended trade fairs to get

buyers while 77% used their own contacts. Half of respondents
also said that they do direct selling locally while 30% market through
traders.

Competitors

As is the case in Metro Manila, China is perceived as the main

competition among Cebu firms (cited by 44%). Other countries
deemed as threats are Vietnam (26%) and Indonesia (12%). The
Background
Sectoral Profile 55

Sales

Cebu based firms had relatively better export sales compared

to Metro Manila companies. About 31% reported exports ranging
from US$1 million to US$3 million and 7% sold over US$3 million to
US$5 million. Almost 39% grossed between US$100,000 to
US$500,000. Only 7% said they exported below US$50,000 while
another 7% sold from US$50,000 to US$100,000. The rest had export
levels of US$500,000 to US$1 million.

There were 20 firms that sold domestically. Almost half of

these (45%) sold under Php1 million locally. Another 45% reported
sales of between Php1 million to Php5 million. The remaining 10%
sold between Php20 million to Php30 million.

The information reflects a slight improvement in export sales

from last year’s survey, when about 48% of firms surveyed sold
between US$100,000 and US$1 million. Not many firms reported
local sales last year with 27% saying that their domestic revenues
were less than Php1 million.

Finance

Most of the budget (48%) of Cebu companies go to financing

56 State of the Sector Report - Philippine Furniture

Source of Assistance

Almost 94% of respondents this year said they did not avail of
aid from donor groups. The only donor group cited as giving help
was CIDA, through Pearl2. An equal proportion of firms also indicated
not getting any assistance from government agencies. Those who
said they got government support mentioned the DTI and the
SBGFC.

Iloilo Key Survey Findings

Date of Establishment

About two-fifths (44%) of the Iloilo firms surveyed were

established within the last five years. Two companies (22%) have
been in the business for 6 to 10 years. The remaining fraction has
been operating for 11 to 25 years; none have been established for
longer than 25 years.

Company Setup

Iloilo furniture producers are mainly micro enterprises (78%)

with 22% considered as small in size. All the firms in Iloilo are sole
proprietorships, similar to the results in 2004.
Background
Sectoral Profile 57

Product Lines

Majority of the products manufactured by the Iloilo furniture

companies are leg items. About 67% of the firms are involved in
the production of tables. Another 22% create bed and chair products.
Aside from these, a lot of the companies also release accessory
items such as lampshades, candle holders, mirrors, trays and vases.
Product lines remain basically the same as in last year’s survey.

Facilities

Majority (67%) of the surveyed firms have more than 250

square meters in business premises. One respondent reported a
100 to 250 square meter area, while the remaining have facilities
with less than 100 square meters of space. Two-thirds of the
companies own their business sites; one-third rents their property.
About 56% are located in commercial locations and 44% are in
residential zones.

In 2004, only two firms provided data on the size of their

premises; one had a shop area of between 100 and 250 square
meters and the other had a facility of over 250 square meters.

Employment
58 State of the Sector Report - Philippine Furniture

Except for the administrative and marketing staffs, the other

departments are male-dominated. Production workers are 76%
male, technical staff are 92% men while quality control personnel
are 57% male.

The daily wage scale in Iloilo is significantly lower than in

Metro Manila averaging Php242 or Php5,314 monthly, though this
has notably improved from less than Php200 last year. There is not
much difference between wages of male and female workers.

The previous report indicated a direct total employment of

only 250 among eight respondents. Slightly more than half (52%)
of these were male and the rest women. Most workers (64%) were
also in production. Males also outnumber females in most
departments except administrative and marketing.

Subcontractors

Majority of the companies surveyed (78%) subcontract work.

The proportion of outsourced operations average 34% among
respondents. The bulk of subcontracted work is in pre-production
(86%) and production (43%). Companies outsourced to an average
of 6 subcontractors throughout the year, compared to last year’s
16. There are about 12 employees per subcontractor, also down
Background
Sectoral Profile 59

Sources of Raw Materials

All Iloilo companies continue to rely heavily on local raw

materials. Some (42%) respondents get their materials from within
Iloilo province, and about 29% bring them in from other areas in
the Visayas. The most salient materials sourcing problem companies
currently face is price, the same as in last year’s survey.

Mode of Production and Operation

None of the work in Iloilo firms is fully-mechanized. Majority

(70%) are fully manual, and 28% are semi-mechanized. One firm
did not provide an answer to the query. Production work is semi-
mechanized for about two thirds of the respondents. Materials
handling, packaging and quality control are predominantly manual
in processes. Last year, 75% of respondents had semi-mechanized
production, while manual labor accounted for the remaining 25%.

Capacity Utilization

Majority (78%) of Iloilo respondents reported operating at full

capacity at the time of the survey compared to none which was
fully utilized last year. One firm, however, reported a 0% utilization
rate while another stated only 50%, bringing capacity usage to an
60 State of the Sector Report - Philippine Furniture

Quality Control

More than half (56%) of the respondents have specifically

assigned personnel in place for quality control-related tasks. One-
third (33%) rely basically on their own equipment and resources to
ensure product quality, and 22% have standard procedures to be
followed. Most (33%) firms said quality control problems concern
raw materials supplies. About 22% also cited production concerns
in quality control. These findings do not vary much from those in
last year’s survey.

Product Development

All of the Iloilo based firms surveyed indicated having their

own resources for product development, and one firm (11%) also
reported using external parties. The previous report showed that
13% used the services of external parties for design work, and
only 38% utilized internal resources for the same.

The major sources of information for product development

are designers (100% of respondents), trade fairs (56%), publications
(56%), buyers (44%) and the Internet (33%). Most or 78% of
respondents were not satisfied with the amount of information
they were receiving for product design; only 22% believe they have
Background
Sectoral Profile 61

Market Coverage

On the average, Iloilo firms generate 74% of total sales from

exports. This reflects an increase from last year, when export
sales only accounted for two-thirds of sales. Exports comprised
100% of the business of 22% of respondents.

One company sold exclusively to the local market. The

proportion of local sales to total revenues of the other respondents
varied from 10% to 80%. Most firms (78%) target the high end
market, 56% also sell to the low end segment and a third also
cover the mid range market. Last year, firms only targeted the
middle and high end markets.

Export Markets

The United States and Europe continue to be the major

destinations of furniture exported from Iloilo. About 67% of
respondents marked the U.S. as their primary target, which rose
from only 30% last year. About 56% also export to Europe, up from
44% in 2004. Other top export markets include Canada, Japan and
other Asian countries, with 22% each.

Marketing Channel and Activities

62 State of the Sector Report - Philippine Furniture

About 67% of Iloilo respondents rely heavily on trade fairs to

promote their products. Other promotional efforts include business
missions and brochures or catalogues, each done by 33% of
respondents. The internet was employed by 11% for promotions.
These were the same promotional tools used by respondents last
year, except for business missions.

Competitors

Like in Metro Manila and Cebu, China continues to figure as

the main competitor among surveyed firms in Iloilo. About 27% of
respondents cited China as the main threat. Other notable
competitors are Thailand and Indonesia. The reasons cited for
this perception are also the same: low prices of goods and cheap
labor are primary strengths of the enumerated countries.

With the exception of Indonesia, respondents to last year’s

survey cited the same countries as their chief competitors.

Sales

Some 43% of surveyed companies’ export sales did not exceed

US$50,000. Another 43% sold between US$50,000 to US$300,000,
and only one firm achieved sales between US$1 million to
Background
Sectoral Profile 63

Finance

About 43% of the total budget of Iloilo respondents is used for

production. This is almost the same proportion as in last year’s
survey. R&D and marketing account for 23% and 20%, respectively,
and administrative and other expenses comprise the remainder.
Last year, administrative and overhead expenses accounted for
one-fourth of operating expenses, and R&D activities were
allocated only 14% of the budget. Marketing consumed 16% in 2004.

About 89% of firms used their own resources for operations,

and 67% had credit lines with banks. Some 22% used funds from
private lenders. A third of respondents also used other various
sources (i.e suppliers’ credit) to fund their operations. These
findings did not much deviate from last year’s results.

Source of Assistance

About 89% of the Iloilo based companies reported getting

assistance from a donor group. Eight firms received aid from CIDA
through Pearl2. Two firms also availed of government help,
specifically from the DOST.
64 State of the Sector Report - Philippine Furniture
Background 65

Production
Management

Pearl2 conducted a Production Management Assessment of the

furniture sector in 2005 covering members of CFIP, CFIF and IFMA.
Data was gathered through a survey of about 43 furniture
manufacturers based in Metro Manila, Cebu and Iloilo. In addition
to the survey, Pearl2 consultants also conducted two production
management conferences and various workshops involving
members of the three BSOs and several plant visits to gather
additional data and present preliminary findings.
66 State of the Sector Report - Philippine Furniture

Overview of the Furniture Manufacturing Process

The general manufacturing process of furniture is presented

in Figure 1 on the next page. The diagram is divided into three
parts, namely, input, processes and outputs. Inputs can be defined
as tangible materials that undergo a transformation process to
produce finished goods in order to satisfy customers. Processes
are consecutive steps performed to transform the inputs into
outputs. The furniture industry is creative in incorporating several
raw materials (inputs) into various designs of products (outputs).

There is a close relationship between inputs, outputs and

processes. The type of material inputs can determine the processes
that will be required. Similarly, the type of output will also
determine the processes.

Inputs

Majority of the furniture manufacturers make use of wood,

metal, rattan and stone as their prime raw materials. For wood,
there are a number of local indigenous woods that are available.
Other common materials used are bamboo, fiberglass, and abaca.

A single material can be used in many ways. Materials such as

 67
Figure 1: General Process Flow of Furniture Manufacture

INPUTS PROCESSES OUTPUTS

Wood
Quality
Inspection
Bamboo

Buri
Drying
Rattan/Wicker
- Kiln Drying
Upholstered
Other - Sun Drying Seating
Work-in-Process
indigenous
materials
- Molding
- Casting Finishing Dining and
MDF - Cutting Assembly/ Living Room
Storage - Spraying Furniture
- Cleaning Framing
Veneer and - Sanding
- Drilling
plywood - Dry Storage - Painting
- Edge Banding - Alignment
- Manual - Brushing Kitchen
- Grooving - Welding
Storage - Coating Furniture
Abaca woven - Rabbet - Fitting
- Sealing/Filling
- Carving
- Exact Sizing - Staining
Leather-inlaid - Dipping
- Rough Sizing Bedroom
- Gluing - Pouring Furniture
Stone
Job out/
Metal Subcontracting Work-in-Process Final Quality Other
Inspection Furniture
Wrought Iron - In-laying
- Weaving
Quality
- Sanding
Fiberglass Control Furniture
- Lamination
Packing Parts
- Powder Coating
Paints - Upholstery - Box Construction
- Carving - Tagging
Other - Labeling
Chemicals

Carton Boxes
Loading
Other packaging
materials

Source: Pearl2 Production Management Assessment Report

68 State of the Sector Report - Philippine Furniture

Manufacturers continue to source and discover indigenous

materials to accessorize furniture. Many product development
efforts in the industry tend to focus on the use of indigenous
materials mainly as selling points of the products. Many of these
materials are not available in countries where they are exported,
thereby increasing their value.

One of the issues that affect the furniture industry is the

depleting source of raw materials. Buyers of furniture are becoming
more concerned with the depletion of forests and they have indicated
the need for alternative materials to wood. The use of materials
that do not give of toxic fumes is another concern. From the
producers' perspective, the supply of these materials also has
become an issue, if not yet a problem.

Finishing materials such as paints, resin and other chemicals

such as thinners and lacquers are typically manufactured abroad.
Procurement by furniture manufacturers may be done through
middlemen who import these items.

Packaging materials for furniture are also locally sourced.

Corrugated carton boxes, styrofoam, plastic bubble sheets, abaca
fiber straps and brown papers are major packaging materials.
Finished goods are packed according to the customer's specification.
Background
Production Management 69

Materials are stored in three to five groups when they are

received. Finishing materials such as paints, lacquers and other
chemicals are stored separately from local raw materials, imported
raw materials and packaging materials. Some materials such as
wood have to undergo kiln drying. The different kinds of wood
available in the local market have different drying times and
conditions. Bamboo has to be kiln dried following certain conditions
to obtain the desired moisture content. Other companies resort
to sun drying as an alternative to kiln dry, which is machine
operated. This also applies for rattan poles.

There are a variety of methods that can be applied on materials

before assembly. Each material is processed differently. Wood,
bamboo, metal and rattan are cut into approximate dimensions
known as rough sizing. Later, they will be cut into more specific
dimensions during exact sizing. Pre-operations in fiberglass works
involve the making of molds for fiberglass casting. Stone, on the
other hand, is cut into its specific size and then are shaped and
grinded to soften rough edges.

Assembly involves constructing the basic frame of the

furniture. Metal frames assembly typically involve welding. Wood
based frames, on the other hand, are assembled through woodwork
or carpentry. Legs, backrest, headboard, posts and other
70 State of the Sector Report - Philippine Furniture

Finishing is one of the most important processes in furniture

manufacturing. It launches the final appeal of the product to its
customers and could be the company's edge against its competitors.
Sanding is perceived as the first finishing process before applying
any coating, but for some products such as laminated furniture, it
could be the last step. Other methods of application in finishing
are spraying, brushing, pouring or dipping, and staining.

Companies compete in the international market based on

quality. Quality Control (QC) performs an important part at the
end of the manufacturing process. Almost all companies surveyed
on their production management activities inspect finished goods
100% before packing. Rejected items are carefully reworked. Given
this process, rejects at the last stage of production seldom occur.

Finally, finished items are packed according to customer

specification. Items are wrapped around bubble packs or brown
papers. Carton boxes are marked with codes to identify the
contents and destination. Styrofor are placed inside the corners
of the boxes to absorb impact and prevent damage in handling.
After packing, they are loaded into the containers for transport to
the ports for shipping.

It may be noted that not all the manufacturing processes

Background
Production Management 71

Finished Products

The finished products of the furniture industry, as noted earlier,

are varied. The changing requirements of the market as well as
the stiff competition among furniture exporters worldwide have
pushed companies to continuously find new and better design.
The local furniture manufacturing industry has produced mostly
indoor and outdoor furniture comprising of upholstered seating,
non-upholstered seating, dining and living room furniture, kitchen
furniture, bedroom furniture, and other furniture parts. Furniture,
especially those for exports, can also be broadly grouped into
classical and contemporary designs.

Manufacturing System and Practices

Different companies in the furniture industry have huge

differences in their production management practices. Although
the industry is better and more formally organized compared to
other related industries, the type and degree of production
management vary greatly. The practices reported here are based
on the Pearl2 survey of furniture firms and plant visits and might
not necessarily be the common practice of all companies in the
industry.
72 State of the Sector Report - Philippine Furniture

ship them out. Due to space constraints, the finished items usually
stay in the firms' area long enough to be inspected and packed.
Many companies do not produce more than is necessary to fulfill
an order.

Capacity

Metro Manila and Iloilo based firms surveyed claim it can deliver
orders within an average of 5 weeks. Cebu companies have a
longer cycle time of 6 weeks. Across all geographic areas,
production capacity increases by an average of 156% during peak
seasons, ranging from 14% up to a 700% increase. The number of
pieces manufactured or containers filled per month during the
lean and peak seasons are the basis for this computation.

Seasonality of Demand

Demand wise, the industry encounters a peak around June

and July, with June being the highest. After these months, demand
picks up again in September and November. These peak months
are influenced by the various trade shows that furniture firms
attend in the first and last quarter of the year. Demand is lowest
in February followed by January and March.
Background
Production Management 73

Scheduling

Basically, orders are processed by firms following a first-in-

first-out (FIFO) or first-come-first served priority scheme in Manila,
Cebu and Iloilo. However, there are companies that accommodate
preferred customers and may not follow the above order receipt
and processing system.

The practice of fixed promised delivery dates is strictly followed

by almost all of the companies surveyed. Upon receipt of an order,
the promised delivery date can be set to 45 days, 60 days or a
multiple of these days with 15 days gap. Depending on the quantity
of the order or the difficulty of the product, the required number
of days is estimated based on a multiple of 15 days.

Companies usually generate their schedules and plans every

week in the three locations. In Iloilo, a number of companies
generate a schedule every time an order arrives. The common
components of the production schedule include the quantity to
produce and time to produce. Some also include the type of product,
assignment of worker and raw material required.

While different companies follow various ways of

estimating the time required to finish a product, there appeared
74 State of the Sector Report - Philippine Furniture

In general, a production scheduler evaluates the time

required to process an order and compares it with the current
capacity of the firm's production workers. Orders are assigned to
a worker or subcontractor who had proven his skill on handling the
product.

The production schedules of respondent firms are affected by

a variety of factors including availability of raw materials,
equipment breakdowns and delays caused by workers. Raw
materials availability was the foremost reason cited by Cebu
respondents for affecting their production schedule. The second
major reason indicated for changes in production schedule was
changes in customer requirements.

Manila producers reported similar reasons: unavailable

materials, change in customer requirements and customer
requirements changes, for affecting their schedule. On the other
hand, unavailable personnel, machine breakdown and reworking
of defects were the major factors that affect the schedule of Iloilo
companies.

Although there were several reasons cited for delayed

schedules, discussions with furniture firms surveyed suggest that
changes in the production schedule are marginal and do not happen
Production Management
Background 75

In Cebu, 16% of orders are shipped out late by at most one

week. In Iloilo, the companies report that rework, materials
unavailability and shipping problems result in delayed deliveries
of at least 1 week. However, this occurs only 5% of the time.

Production Monitoring

Some bigger and more organized furniture companies have

systematic monitoring of their production following explicit
schedules and output. In some companies, computers are used for
monitoring work. At least one company used ERP programmers to
integrate their operations with their plans and schedules.

Smaller companies, however, still resort to manual monitoring.

Many of these small companies still rely on end of the week
deliveries from subcontractors and informal checks by supervisors
to expedite job orders. Among the forms and reports used include
work progress reports, stock transfer forms, materials requisition
and inventory report.

Manufacturing Cost

The three largest components of manufacturing cost are raw

materials (44%), labor (24%) and overhead (10%). Other production
76 State of the Sector Report - Philippine Furniture

Eighty-six percent (86%) of the total respondents in the

production study had instituted cost reduction programs. Cebu
firms ranked the highest with 93% of respondents indicating that
they had a cost reduction program in place. In Manila, raw material
is given the highest priority in cost reduction programs. This is
followed by labor cost. For Cebu, the priority is raw material
followed by overhead costs. For Iloilo, the highest is waste and
overhead followed by labor costs.

Raw Materials

Raw materials such as plywood, gemelina, arakama, bamboo,

rattan and other indigenous materials, as well as steel and brass,
are typically acquired through local suppliers. About half of Cebu
companies import their materials while those in Metro Manila and
Iloilo typically source locally. The imported items are usually paints
and chemicals coming from Taiwan and China. Some types of wood
not found in the country are also imported.

Furniture firms procure their raw materials in various forms

(unprocessed, semi-processed and processed). The proportion of
each type of material acquired indicates how companies manage
their materials.
Background
Production Management 77

Packaging Materials

Eighty-two percent (82%) of the respondents purchase

packaging materials from suppliers. The remaining firms either
make their own packaging materials or buy the needed supplies
and manufacture their own. Some 93% of total respondents pack
their finished goods. About 88% of them pack according to the
customer's specification. Some develop new packaging materials
to meet their clients’ demands.

Inventory Monitoring

In Manila, materials are kept in storage from 2 to 4 weeks.

For Cebu, raw materials are usually stocked between 3 to 5 weeks
in general. Iloilo respondents report that they keep inventories
from 1 to 4 weeks, the least time among the three geographic
areas. In most cases, the storage time of wood includes an allowance
for kiln drying.

The availability of stocks among suppliers limits the amount

of materials the firms can purchase. The availability of storage
space also places a limit on the amount of raw materials that can
be bought. A third reason for keeping fewer stocks is the perishable
nature of certain materials. As an example, molds that would
78 State of the Sector Report - Philippine Furniture

mishandling. Mishandling of materials is a common issue for

companies across all three geographic areas covered in this report
with respondents in Manila rating it particularly high. Other reported
problems include spoilage and dust.

Organization and Personnel

Considering the size of most of the industry's companies, their

organizational setup usually involves between three to four levels.
At the top is the owner/manager. For smaller companies, there is
a middle management level which is typically one person in charge
of production that is in between the manager owner and the bottom
level which is made up of the workers. For bigger companies, two
levels are in between the top level and the base. There is a
production management, and sometimes a quality management
group. Below them are supervisors who handle different aspects
of production.

The industry employs three different types of production

workers under different working terms. Almost all respondents
(98%) hire regular production workers. About two thirds also hire
contractual personnel, while a little more than half (57%) also hire
piece rate workers.
Background
Production Management 79

Regular production workers in Manila and Cebu have usually

finished high school, while regular workers in Iloilo have only finished
elementary. For all areas, workers stay in the company for an
average of 1 to 4 years. The average age of workers is about 30
years old.

The production management team among respondents is usually

composed of the production scheduler, inventory manager
(purchasing), warehouse and quality control supervisor with the
QC people being twice as many as the rest of the management
staff. Across all geographic areas, management personnel have
generally been with their companies for 5 to 10 years. Manila and
Iloilo management staff are relatively young with their ages falling
between 20 to 30 years old. In Cebu, production management staff
are generally between 30 to 40 years old.

Overall, about 21% of surveyed firms indicated that they had

no accidents in the work place. Most firms (62%) said that they
had from 1 to 5 accidents or injuries in a year. The rest stated
that they had five or more accidents in a year.

Subcontractors

Most firms in the industry subcontract work in their operations.

80 State of the Sector Report - Philippine Furniture

From the survey and plant visits, it was noted that very few
firms used the bidding system to identify subcontractors. No
company in Metro Manila and Iloilo reported using bidding to
identify their subcontractors. About a third of respondents in Cebu
claimed to use the bidding system.

Slightly more that half (53%) of all respondents provide all

types of materials to their subcontractors. This practice is highest
In Manila (75%) followed by Cebu (60%). There are several reasons
why a company supplies raw materials to their subcontractors.
First, the quality of raw materials can be monitored and maintained
by the company as they purchase these materials from reliable
suppliers. In addition, the quality is uniform across all the
subcontractors who will do the work as they come from a single
source. Secondly, the cost of materials may be lower because of
bulk buying. Third, providing for materials eliminates the need
for the subcontractor to search for and buy the materials. This
simplifies the system and avoids delay in searching for and
acquiring materials.

Companies that do not hire subcontractors pointed out

that there is the issue of consistency of quality. While the quality
of materials may be maintained through provision of raw materials,
workmanship quality is not assured. These companies prefer to
Background
Production Management 81

Skills Training and Development

Among respondents in the survey, there is a wide variation in

the length of time to train workers. A third said it takes less than
a month for workers to become skilled. About 17% of all respondents
said that it takes from one to two months to develop a skilled
worker. Some 14% claimed it takes two to four months to train
workers. The rest varied from four months to two years.

The longest training for skilled workers seems to be in Iloilo

and Cebu. In Iloilo, 70% of respondents indicated that their training
last from two to eight months. In Cebu, about 61% of firms surveyed
said that it takes from two to more than eight months to train a
skilled worker. In Manila, 43% claim that it takes one week to one
month for new workers to be skilled with another 29% saying their
training last from one to two months. Nineteen (19%) percent of
the Cebu and 14% of Iloilo respondents pointed out that they only
hire skilled workers.

Few companies provide formal training to their workers.

Workers basically learn on the job. Others bring in their learned
skills from other companies. In the industry, there seems to be no
proper training on standard procedures in handling orders that the
worker should learn. The new workers learn these through informal
82 State of the Sector Report - Philippine Furniture

Firms in Metro Manila have the highest rate of raw materials

rejects at 12%. In Cebu, the materials reject rate is 7% while in
Iloilo it is 5%. Metro Manila based respondents also have the
highest work in progress reject rate of 8% compared to Cebu (7%)
and Iloilo (5%). Both Metro Manila and Cebu firms have similar
reject rates in finished goods at 5% each. In Iloilo, it is 2%.

The yield in raw materials averages 81% among all respondents.

Yield is defined as total raw materials minus raw materials rejects,
waste and rejected final products. It is highest in Iloilo at 88%
followed by Cebu at 82%. Metro Manila firms have a relatively low
yield averaging 76%.

Materials Inspection

About 95% of total respondents perform raw material

inspections. Of the Manila respondents, 86% report that they
conduct incoming raw materials inspection. In Cebu, 97% of
respondents inspect materials before they are placed in the
warehouse. 100% of Iloilo companies conduct incoming materials
inspection.

Production Process Standards

Background
Production Management 83

In Cebu, 93% have process standards and 100% have product

standards. For Iloilo, 100% have process standards and again, 100%
have product quality standards. These standards are either set by
the company or customers or by both.

One or more persons are usually assigned to inspect incoming

raw materials and finished goods. For the three geographic areas,
the respondents' basis for quality is the customer's specification
and the company's standards. Some companies also perform physical
testing of raw materials and finished goods.

Facility Layout and Design

Most companies, regardless of location, follow a continuous

flow type of layout. Plants are divided into major parts: raw
materials storage area, further divided into local and imported
materials; wood working, lamination, framing, weaving, assembly,
finishing (sanding, painting), and packing. Processes are arranged
to indicate the sequence of processes. Similar processes are
allocated an area within the factory floor. Workers doing the same
task are located in the same area. Alternatively, workers under
one subcontractor doing only a single order can be assigned a
place in the factory. Some contractors work on company premises.
Most of the companies in all locations follow a U or L-shaped layout
84 State of the Sector Report - Philippine Furniture

The survey found that the common reasons of respondents

for rearranging their plant are increases in volume of work, increase
in personnel and increase in inventory. In other instances, the
type or size of the product, depending on space requirements can
also dictate the need for re-layouting of the factory. Firms in Metro
Manila and Cebu change their layout every year or when needed.
Those in Iloilo change their layout only every two or three years.

Machines and Tools

The furniture sector's manufacturing system requires various

machines and tools. The most common machines used based on
the percentage of respondents using them, are: band saw (8%),
table saw (7%), compressor (5%), spindle moulder (5%), circular
saw (5%), planer (4%), router (4%), jointer (3%), thickness planer
(3%) and lathe machine (3%).

Tools are more extensively utilized. The common ones include

drill gun (19%), nail gun (10%), portable grinder (10%), spray gun
(9%), tackers (9%), jig saw (4), orbital sander (4%), hammer (3%)
and screw driver (3%).

The more common reasons for acquiring equipment are age

and expansion. Almost all respondents replied that machines were
Background
Production Management 85

While company fabricated equipment was not reported, it

was noted that the Department of Science and Technology (DOST)
can help furniture companies fabricate their own equipment. Spray
booths, as they are also expensive, can also be locally fabricated.

Most, if not all, of the companies surveyed have manual

materials handling techniques. The space between processes or
areas is small and distances are short thereby not requiring
materials handling equipment. Some have trolleys or carts to move
materials in between processes or areas. In only one plant was
roller conveyor systems used to move the products.

Most of the respondents do not report any problems with

machine breakdown nor do they consider them disruptive. There
seems to be a clear standard of procedures in maintaining
equipment. On the average, most companies inspect their
machines on a weekly basis.

A common practice on the use of tools and equipment is to

place responsibility on the worker to keep and maintain the
equipment and tools.

Product Engineering and Development

86 State of the Sector Report - Philippine Furniture

Cebu based firms have relatively more personnel engaged in

product design with an average of 4 designers each and 12
prototype makers. Metro Manila furniture companies have an
average of 3 designers and 5 prototype people, who are typically
pulled out of production whenever needed for prototyping. Those
in Iloilo have an average of 3 designers and 5 prototype makers
per company.

Twenty-nine percent (29%) of Manila respondents have a design

laboratory. Iloilo has 33% of its manufacturers who have design
facilities while Cebu has 36%.

On an industry level, more than half of the firms surveyed

(54%) can produce from 1 to 30 new designs per year. A significant
portion (35%) of companies are quite busy in their design activities,
turning out from 75 to more than 100 designs yearly. Cebu
manufacturers come up with the most product designs with 29%
making from 75 to 100 designs yearly and another 14% producing
more than 100 annually. Most manufacturers in Manila (66%) turn
out from 50 to 100 designs yearly. In Iloilo, majority produces 10
to 30 designs per year.

Environmental Management
Production Management
Background 87

materials. About 83% of Iloilo respondents generate between 5%

to 10% waste. These figures are rough estimates since most firms
do not have an accurate means of measuring the waste they
generate.

Surveyed firms employ several methods of managing generated

waste. Some 48% of respondents dispose of their waste products,
42% reuse waste for other purposes, 31% sell waste products and
15% reprocess waste for use in production. Other methods used
include incineration (7%), composting (7%) and treatment (4%).
88 State of the Sector Report - Philippine Furniture
Background 89

Value
Chain
Analysis

Structure of the Furniture Sector

The Philippine furniture industry is composed principally of

micro, small and medium enterprises. It is a labor-intensive
industry, with most firms subcontracting production. Most firms
export to the US, which accounts for some two thirds of the
furniture export market. There are also firms that cater to the
domestic market. For their sales, furniture firms rely on importers,
90 State of the Sector Report - Philippine Furniture

Raw materials suppliers and subcontractors are normally home-

based units composed of family members. They perform the various
stages of production such as assembly in their shops, which can
be a small place in their homes. They supply the local market and
the furniture exporters with their products. Being mostly micro or
small in size, these firms often lack resources and formal technical
or management training.

Most furniture manufacturers use local materials such as wood

(lacuna and mahogany), rattan and bamboo. Due to the shortage
of local wood materials, some manufacturers now import wood
such as pine, alder, beech, cherry, maple, ash, oak and rattan.
Their sources include Australia, Canada, Malaysia, the United States
and New Zealand. In some cases, furniture firms develop linkages
with local communities of farmers or traders to secure their supplies
of wood, buri, bamboo, raffia and rattan.

Furniture export sales are facilitated through any of the

following:

•Importers buy furniture from Philippine exporters and sell

to department stores, retailers, hotel construction projects
and specialty stores.
•Retailers such as Pier 1 Imports, La-Z-Boy, Idea, Pottery Barn,
Background
Value Chain Analysis 91

Furniture Value Chain

The value chain diagram of the furniture sector is presented

in the next two pages. This covers the industry as a whole.The
process flows of the four major phases — Inbound Logistics,
Operations, Outbound Logistics, and Marketing and Sales —are
presented in Annexes 12.1 to 12.4. The furniture value chain
diagram has not been changed since the previous report in 2004.
The flow and activities in major stages remain the same.

Key Findings on the Value Chain Analysis

The shortage of quality wood for furniture firms has been

aggravated by the restrictions on local logging which was instituted
in 2004. This has added to the concerns in the inbound logistics
part of the furniture value chain. Continued importation of wood
can help alleviate the supply shortage but adds cost to operations.
Some items used in the finishing process which are imported have
also risen in cost and also suffered from some supply issues.

There is a lack of industry standards on the materials and

components used by firms. This results in variations in the quality
of materials, semi-finished materials and other products obtained
from suppliers and subcontractors. In addition, the lack of adequate
64
92-93 • Value Chain Analysis • S

The Furniture Sector Value Chain Diagram

FIRM • Difficulty in accessing credit

INFRASTRUCTURE • Lack of documented quality management systems
• Difficulty in meeting procurement, production targets

HUMAN • Training in Material Sourcing and • Short training/workshops on • Training in Distribution • Training in Marketing and • Traini
RESOURCE Development production techniques Sales Handle
MANAGEMENT Claims
• Phone, E-mail, fax, face-to-face • Semi-mechanized production • Communication: phone, • Communication: phone, • Comm
meetings • Single-function machines, and at E-mail, fax, face-to-face E-mail, fax, face-to-face E-mail,
• Computer: typing and printing times, locally fabricated and mini type meeting meeting meetin
• Paper-based/manual processing • Product development: CAD, improved • Crate-foam packaging • Website promotion
• Manual (non-integrated) routing: aesthetics • Manual goods handling • Internet surfing
TECHNOLOGY requisition or order placement, tracking, • Manual coordination of tasks • Magazines/publications:
DEVELOPMENT receiving, storage, inventory and • Quality control: physical/ visual buyers and design/market
distribution inspection information
• Quality control: physical/ visual • Physical testing
inspection • Dust collector/basic waste
• Manual to semi-mechanized material management
processing
• Information sourcing: formal and • Reactivation of equipment • Canvass and purchase of • Information on trade • Coord
informal network maintenance packaging materials fairs supplie
• Selection and evaluation of suppliers: • Monitoring of subcontractors: actual • Manual coordination of • Sourcing of exhibition
actual visits, trade fairs, DTI market visits shipping and consolidation supplies
matching
PROCUREMENT• Negotiation and monitoring: actual
visits
• Cash advances and provision of tools
to suppliers
• Facilitation of reworks and
replacements
• Maintenance of inventory
• Pick-up or delivery of materials by • Preparation of jigs, templates and • Checking of finished • Trade fair participation
suppliers (using a mix of local and control samples good prior to packing (primary tool)
imported materials) • Semi-mechanized rough milling, • Packing and labeling • Selling missions and
• Quality checking: 100% or random machining and sanding • Final inventory and personal visits to buyers
sampling • Work-in-progress: carving, stone checking • Catalogs, mailers,
• Hand sorting and grading: rejects are inlaying • Manual product handling Websites, referrals
returned to suppliers or repaired in- • Assembly and carpentry: manual operations • Sampling and counter-
house Fiberglas casting, upholstery, metalwork • Shipping and sampling
94 State of the Sector Report - Philippine Furniture

The development and knowledge of these standards can render

furniture firms a competitive edge in the global marketplace. Other
concerns at the production level include the need for better factory
layout, improved worker productivity and training, waste
management, control of dust and fumes, better appreciation and
use of tools and equipment, improved production planning and
more R & D on new materials for furniture.

Although furniture designers are lauded for their craftsmanship,

there is a need to make these designs more functional and
economical to manufacture. This means that products should go
beyond being just aesthetically attractive and designers should
pay more attention to the costs the commercial manufacture of
their designs entail.

Among the most pressing concerns of manufacturers in the

outbound logistics part of their value chain are the high cost of
packaging materials and inter-island shipping. In marketing,
producers find participation in trade fairs to meet existing and
new buyers expensive. Compared to other furniture shows in the
Asian Region, there are not that much foreign buyers that come to
the Philippines making it necessary for furniture companies to be
more aggressive in their marketing abroad. However, this also
means that marketing efforts become more costly.
Background
Value Chain Analysis 95

The Furniture Sector Value Chain Table

INBOUND LOGISTICS

FINDINGS CONCERNS RECOMMENDATIONS

Human Resource Management

The base of suppliers and Without a supply base Upgrade suppliers’ and
subcontractors that can responsive tothe demands subcontractors’ skills
deliver goodsin the of the industry, product- through Productivity and
quality and volume upgrading efforts by the Quality improvement
required is narrow. SMEs are compromised. It programs.
will be hard for firms to
move to higher-end
markets.

The delaysconsequently
raise furniture makers’
prices,rendering them less
competitive.

Manufacturers givelow Improved skills can lead to Facilitate access to training

priority to humanresource more efficientreceiving, and mentoring services in
skills neededfor inbound warehousing andinventory supply chain management.
logistics. control of materials.

Training obtained by Manufacturers and Linkageswith technical and

subcontractors and suppliers do not have their education institutions could
suppliers is “reactive,” own resources toshoulder be leveragedto facilitate
instead of proactive in the training costs. Such regular conduct of short-
nature. training, however, will term technicalcourses
improve the base for aligned to the industry’s
domestic and export trade. needs.

Strengthen the capabilityof

96 State of the Sector Report - Philippine Furniture

INBOUND LOGISTICS

FINDINGS CONCERNS RECOMMENDATIONS

Human Resource Management (con’t)

Some furniture makers’ Other system-wide changes Customize training

employees lack the skills adopted by the industry programs in supply chain
and know-how in supply will work only if the management with
chain management workforce is equipped with particular attention to:
adequate know-how. • determining
requirements
• appraising suppliers
• contract negotiation
• group purchasing
• supplychain technology
deployment and
management
• supply-market analyses
• supplycontracts
• use of the ICT in supply
chain management
• environmentally
responsible operations
• quality standards

Technology Development

Firms use a QC system for The QCproblems may be Facilitate the introduction
inputs thatrelies on due to lack of standards. of Quality and Productivity
assigned personnel and, improvement coursesto
thus, is highly variable. establish standards.

Most firms have QC There is a severe lack of Standards inraw materials

problems with theirraw documented and agreed should be established
materials. standards inraw materials between furniture firms and
within the industry. raw materials suppliers,
Background
Value Chain Analysis 97

INBOUND LOGISTICS

FINDINGS CONCERNS RECOMMENDATIONS

Technology Development (con’t)

The industry lacks a The manufacturers’ Set up a QCsystem for

system that motivates inability to project suppliers and
suppliers and production and delivery subcontractors thatwill be
subcontractors to deliver schedules accurately supported by trainingand
promptly and meet a zero- dampens the market. mentoring programs.
reject target.
Institutionalize incentives
to induce suppliers and
subcontractors to deliver
promptly with zero rejects.

The level of material and The manufacturers’ Launch anawareness

process control capabilities to resolve campaign on the industry’s
technologies is low. problems in material technology gaps and.
quality are limited.
Build a base of service
providers to assist
manufacturers inadapting
and upgradingtheir
materials and process
control technologies.

Stimulate the adoption of

better materials and
process control
technologies through
matching grants or
incentive-based support.

Furniture firms have not The use of ICTscould Popularize successstories

maximized the use of new facilitate cost and process of firms that used ICT to
98 State of the Sector Report - Philippine Furniture

INBOUND LOGISTICS

FINDINGS CONCERNS RECOMMENDATIONS

Technology Development (con’t)

The know-how in material Inefficient processing can Implement skills upgrading

processes islow, lead to substandard program for suppliers.
especially among quality.
suppliers.

Reliable informationon Manufacturers are Set up orupdate databases

materials and sources is constrained to work with of materials and suppliers
lacking. existing materials and/or to make these
sources, thereby limiting comprehensive.
their potential for
expansion and
diversification.

The industry lacks effort in The use of alternative Support R&D in raw
exploring the applicability materials can help solve materials, particularly
of lesscommon species of dwindling supplies of experiments with
plantation timber. commonly used materials. alternative materials. This
may be donethrough
strengthening the
capabilities of DOST and
PDDCP, as well as private
providers or institutions.

Transactions with The clustering of suppliers Trade associations could

suppliers and and subcontractors will work with
subcontractors require reduce transactions costs, suppliers/subcontractors to
personal visits and especially travel costs. promote specialization and
meetings. geographical clustering.

Promote the use ofICTs as

a way of reducing costs.
Background
Value Chain Analysis 99

INBOUND LOGISTICS

FINDINGS CONCERNS RECOMMENDATIONS

Procurement

Most firms source their Resources are spent on low DTI used to sponsor a trade
raw materials from the value-added taskssuch as fairwhere producer firms
open market. searching forsuppliers. could be matched with
These tasks can be subcontractor and supplier
outsourced. firms.This could be
continued incoordination
The timelag inresponding with trade associations,
toorders that are beyond designers and support
the capacitiesof suppliers agencies.
and subcontractors
stretches.

OPERATIONS

FINDINGS CONCERNS RECOMMENDATIONS

Human Resource Management

The skills basesuffers The investment in skills at In collaboration with

from problems ofquality all levelsis apre-condition technical and vocational
andrelevance — problems to improvedinternational schools, implement a
that will magnify as the competitiveness. knowledge-transfer
industry moves tomore program withmodules
complex products. identified and developed
together with the industry.

The curricula and staffing The industry’s long-term Tapspecialists to evaluate

for design education are needs can only be met by the education of designers
inappropriate. increasing the technology with a view of
content of design recommending curriculum
education. change.
100 State of the Sector Report - Philippine Furniture

OPERATIONS

FINDINGS CONCERNS RECOMMENDATIONS

Human Resource Management (con’t)

The lack of qualified Product development cost Develop Websites that will
designers in regions increases as a result of the provide manufacturers in
outside Metro Manila extra logistical expenses the provinces access to the
forces manufacturersto (communication, travel designs ofManila-based
turn toManila-based and accommodation) designers.
designers. incurred from using Manila-
based designers. UseICT in order to optimize
linkageswith the academe
fordeveloping designers in
the provinces.

Technology Development

The exporters lack Standards, whether those Develop affordable

awareness of global observedat the production mechanisms (e.g., matching
standards (sizing, finishes, process or in checking the grants, vouchers, etc.) to
and technical, safety and finished product or both, stimulate acquisition of
environmental are becoming increasingly services thatwill enable
requirements). important qualifying makers tocomply with
requirements for buyers’ standards. Ensure
participation in the global continuous Productivity and
furniture trade. Makers Quality improvement
will encounter difficulty programs.
retaining competitiveness
unlessthey can meet these
standards.

Designing development is Designersshould be taught Enhance designers’

not oriented to cost- tobalance the needsof knowledge ofcost-effective
efficient production. the market with the production through training
makers’ capability to and mentoring.
Background
Value Chain Analysis 101

OPERATIONS

FINDINGS CONCERNS RECOMMENDATIONS

Technology Development (con’t)

The technologies being Automation could shorten Facilitate the

developed are neither production lead timeand mainstreaming of modern
applicable to commercial ensure qualityconsistency. production processes and
production noraffordable technologies.
to manyof the Voucher/matching grant
enterprises. instruments could mitigate
the issue of costs.

The industry lacks the Eco-industrial production Deepen the SMEs’

know-how for cleaner methodssave costs and understanding ofthe
production technology, boost international environment variables and
recycling and waste competitiveness. how these relate toboth
management. business sustainability and
the development process.

Improve the ability of

environmental managers to
speak the “language of
business” in orderto
accelerate the spread of
responsible environmental
management practices.

Factor in the promotion of

environment-friendly
production technologies in
skills trainingcourses.

Makers lack access to Inorder to penetrate and Investigate the possibility of

modern production expand in the quality — in a common service facility-
facilities. contrast to the price — cum- trainingcenter that
102 State of the Sector Report - Philippine Furniture

OPERATIONS

FINDINGS CONCERNS RECOMMENDATIONS

Technology Development (con’t)

Especially in the The number of regulations Strengthen the R&D

provinces, the industry in quality standards being facilities manage d by
lacks testing and R&D enacted in target markets government. Encourage the
facilities. is ever increasing. private sector’s deliveryof
these services.

OUTBOUND LOGISTICS

FINDINGS CONCERNS RECOMMENDATIONS

Technology Development

Inventory systems, and The integration of Facilitate technical

shipping and delivery outbound logistics/system assistance that will enable
schedules are usually withother units willgive companiesto adopt an
stand-alone systems. the company a integrated system (from
comprehensive picture of order placementto
operations at lesstime and delivery to finance).
with less effort.

The cost of packaging Product quality is Facilitate manufacturers’

materials is high. compromised. evaluation ofcurrent
packaging practices
Present packaging according to standard
practices entail methods.
unnecessary costs,
including environmental
costs.

Procurement
Background
Value Chain Analysis 103

MARKETING AND SALES

FINDINGS CONCERNS RECOMMENDATIONS

Technology Development

Firms tend to shift from Resources are spread Promote specialization and
one product line to thinly and, assuch, complementation among
another, and to use a very companies are unable to firms.
wide rangeof optimize production and
components. obtain maximum yield
from existing equipment.

Furniture firms need to A consistent product- Initiate the sharingof best

improveon their product portfolio mix will guide practices inthe
mix insteadof constantly firms in focusing their formulation and
gearing operations tothe product development and implementation ofproduct-
specific requests of marketing efforts. portfolio policies and
buyers. implementation as
mentoring support to
manufacturers.

Firms lack cohesive, Promotions will be more Support the conduct of a

integrated marketing effective if they are unified marketing campaign
campaigns.for both the anchored on specific designed aroundspecific
foreign and local product differentiation product differentiation
markets. factors thata region, or factors.
the Philippines as a whole, Tap the potential of the
can sustain. local furniture market.

Prices are calculated Pricing strategies,such as Attend PTTC workshops on

based on assumed costs, economies of scale, pricing and costing.
instead of evaluated retrograde pricing,are not
costs. Market-based considered toarrive at
pricing is non-existent. optimum pricing.

Most firms use the Effective use ofICTcould Document

Investigatesuccess
the possibility
104 State of the Sector Report - Philippine Furniture

MARKETING AND SALES

FINDINGS CONCERNS RECOMMENDATIONS

Procurement

Furniture makersare Without trade fair Support group participation

unable to approach participation, itwill be in international trade fairs
foreign markets by difficult formanufacturers and sellingmissions.
themselvesdue to the togenerate orders and Strengthen the capacity of
high transaction costs and meet buyers. CFIP and CFIF to organize
the lackof appropriate trade fairsand other
contacts. marketing events.

SERVICES

FINDINGS CONCERNS RECOMMENDATIONS

Technology Development

Manufacturers lackefforts The use if ICTs, including Attend the PTTC seminars
to use Websites for Websites, is fastbecoming on how tohandle Websites
customer support. an additional indicatorof for customersupport.
efficient customer service
in the global market.

Firms do not have records Formal documentation of Introduce to companies the

of customerrepair repair services identifies use of software for
services. the areas where exporters customer relationship or
should improve customer account
performance. management.
Background 105

Needs
Assessment
The value chain analysis of the furniture sector has identified
various needs and issues. These needs remain essentially the same
as in last year’s report and are presented in this section.

Firm Infrastructure

•The industry needs to bring together its suppliers,

subcontractors, exporters, traders, buying agents, selling
agents, trade associations and pertinent government
agencies to discuss industry problems in inbound logistics,
operations, outbound logistics, marketing and sales and
services, and the possible solutions to these. This can be
106 State of the Sector Report - Philippine Furniture

•An accreditation system for suppliers and contractors is

needed to ensure they comply with the standards required
by producers.
•The collective purchasing of raw materials and equipments
should be explored as a means to lower unit costs.
• Promote the use of Information and Communication
Technologies (ICTs) in supply chain management.
•The capability of the furniture associations to lobby
government for lower tariffs on the production inputs and
other measures to alleviate the supply issues in raw
materials need to be upgraded and expanded.
•Raw materials suppliers, subcontractors and furniture
exporters need to regularly attend Quality and Productivity
courses.
•In coordination with government agencies such as the
Product Design and Development Center of the Philippines
(PDDCP), a database of sources of raw materials and
alternative materials for producers that are experiencing
supply shortages needs to be organized.

Operations

•Product specialization and complementation among firms

needs to be explored. Firms can be organized in such a
Background
Needs Assessment 107

• The services of furniture production experts who can set

up industry standards on production and quality control
processes are needed.
•Factory workers need continuous training on productivity,
quality control and an appreciation for the proper use of
tools and equipment.
•Firms need to attend seminars and training programs on
environmental management systems, total quality
management (TQM), health and safety standards, sizing
and other ISO standards.
•A program is needed to facilitate the acquisition of modern
production and quality control technologies.
•Companies, especially the smaller ones, need a program
which will help them improve their factory layouts and
production management system.

Outbound Logistics

• Closer coordination of raw material procurement,

warehousing and storage, inventory, packaging and
shipment with other areas of business such as finance,
administration is needed through an appropriate system
preferably using ICT.
108 State of the Sector Report - Philippine Furniture

Marketing and Sales

• Regular sources of market information and trends on

furniture demand and distribution in the U.S., Europe and
potential growth markets need to be developed by the
trade associations and made available to member firms.
• The local furniture industry needs to develop new markets
and lessen dependence on the U.S. for exports. Market
information can also be disseminated to furniture firms
in the provinces through E-mail and electronic mailing
groups.
• There is a need to encourage the more active use of ICTs
for marketing and sales among furniture firms.
• Sustained participation in trade fairs as a marketing tool is
needed as well as the use of other promotional tools such
as Websites.
• The industry should also firm up a program for the domestic
furniture market and deal with the increasing competition
posed by imported products.

Service

• Improved handling of merchandise complaints from buyers

Background 109

Strategic
Direction

Given the market conditions for furniture and the findings in

the value chain analysis and other sections of this report, this
section presents a strategic direction for the industry over the
next few years.

Over the short term, the industry needs to arrest the general
decline in exports over the past years. Efforts should be focused
on recovering lost market share and developing untapped markets
overseas. While it seeks to strengthen export performance, the
sector should also take measures to protect and further develop
the domestic furniture market which is presently being threatened
by low priced imports.
110 State of the Sector Report - Philippine Furniture

Over the long term, the furniture sector should institute the
needed changes in its production system to improve product
competitiveness. Focus should be placed on continuous
improvement of productivity at both the subcontractor and exporter
levels. This entails investments in equipment, tools, plant re-layout
and worker training.

Given below are the recommended programs and activities

for the furniture industry over the next few years.

1. Develop an industry wide competitive strategy for the

global market backed up by the needed market intelligence
system.
2. Review the present market channels and consumer trends
in the U.S., the main market for Philippine furniture, in
order to devise a better approach in competing against
other countries in the U.S.
3. Undertake an intensive program for new market
development overseas given the revised industry strategy
for the sector.
4. Expand access of the industry to information on design
and product trends in key target markets abroad to enable
more market driven product designs.
5. Assess and tap the local market for furniture and improve
Background
Strategic Direction 111

8. Develop a center for materials and product research backed

up by the required technology, skills and equipment.
9. Establish a rating and accreditation system for
subcontractors for use and reference of furniture
exporters.
10. Promote the use of ICT among furniture companies in
work monitoring, production planning and scheduling,
inventory management and other applications.
11. Expand the pool of competent designers in provincial areas
by increasing networks between design schools and the
industry.
12. Develop community forests as ecological farms to manage
and expand supply of wood and other raw materials.
13. Establish and maintain a common database for raw
materials, equipment vendors, suppliers and related
information for access by furniture firms.
14. Review and assess current manufacturing practices in the
furniture industry to develop uniform standards for use in
production.
15. Set up a program for upgrading advocacy capability of the
furniture industry to lobby for better policies to improve
the business climate of the sector.
16. Improve network and coordination between the different
groups and stakeholders in the furniture industry to
112 State of the Sector Report - Philippine Furniture
Background 113

Annexes
114 State of the Sector Report - Philippine Furniture
Background
Annexes 115

Annex 1:
The Value Chain Analysis
The Value Chain Concept
Value chain analysis is a method of identifying and understanding
the various activities of an organization that provide value to its prod-
ucts or services and the linkages among such activities. It is used to
determine which aspects of a firm’s operation can be enhanced, and
where to reduce costs, optimize resource use, or even reconfigure
the entire chain of operations for better performance. The end re-
sult of this effort is increased product or service value, lower costs
of operation, or both.

A value chain covers two sets of activities. The first refers to the
primary activities of a firm and consists of inbound logistics, opera-
tions, outbound logistics, marketing and sales, and service. These
are the activities that organizations engage in to produce a product
or service.

The second set covers support activities that indirectly contrib-

ute to the firm’s operations. These include the organization’s infra-
structure, human resource management, technology development
and procurement.

All these activities are interconnected and work in a process

that can be structured into a value chain diagram. A firm’s value chain
can also be linked with external chains such as those of its suppliers
or buyers.

Value Chain Analysis in Sectoral Enhancement

An adaptation of the generic value chain described in Dr. Micha-
el Porter’s book Competitive Advantage was used to analyze the struc-
ture and performance of industries or sectors covered in Pearl2’s
116 State of the Sector Report - Philippine Furniture

the Business Support Organization identified for the sector. The anal-
yses are not by any means comprehensive and do not involve any cost
estimates for the chain or a comparison of the value chain of a similar
industry or with similar features in other countries or regions. Due to
time and resource constraints, no references were made to external
value chains.

Reference: Michael E. Porter, “Chapter 2: The Value Chain and Competitive

Advantage,” Competitive Advantage (New York: Simon & Schuster,
1985), pp. 33-61.
Annexes
Background 117

Annex 2:
Furniture Product Classification
by HS and PSCC
HS PSCC DESCRIPTION
9401.10 821.11-00 Seats of a kind used for aircraft
9401.20 821.12-00 Seats of a kind used for motor vehicles
9401.50 821.13-01 Seats of bamboo
9401.50 821.13-02 Seats of rattan or cane
9401.50 821.13-03 Seats of buri
9401.50 821.13-09 Seats of osier or similar materials
9401.30 821.14-00 Swivel seats with variable height adjustment
9401.40 821.15-00 Seats, other than garden seats or camping equipment, convertible into beds
9401.61 821.16-01 Seats, n.e.s., with wooden frames, upholstered
9401.69 821.16-02 Seats, n.e.s., with wooden frames, not upholstered
9401.71 821.17-01 Seats, n.e.s., with metal frames, upholstered
9401.79 821.17-02 Seats, n.e.s., with metal frames, not upholstered
9401.80 821.18-01 Seats, n.e.s., of stone or marble
9401.80 821.18-02 Seats, n.e.s., of wood
9401.80 821.18-03 Seats, n.e.s., of metal
9401.80 821.18-04 Seats, n.e.s., of plastic
9401.80 821.18-09 Other seats, n.e.s., of other materials
9401.90 821.19-01 Chair controls
9401.90 821.19-09 Other parts of the seats of subgroup 821.1
821.3 Furniture, n.e.s., of metal
9403.10 821.31-01 Filing cabinet designed to stand on the floor, of metal
9403.10 821.31.09 Other furniture, n.e.s., of metal, of a kind used in offices
9403.20 821.39-01 Portable ice chests, fiber glass insulated, of iron or steel
9403.20
9403.20 821.39-02 Music stands, of metal
9403.20 821.39-03 Beds, of metal
9403.20 821.39-09 Other metal furniture, n.e.s.
118 State of the Sector Report - Philippine Furniture

Annex 2:
Furniture Product Classification
by HS and PSCC (cont’d)
HS PSCC DESCRIPTION
821.7 Furniture, n.e.s., of other materials
9403.70 821.71-00 Furniture, of plastics
9403.80 821.79-01 Furniture, of stone or marble
9403.80 821.79-02 Furniture, of bamboo
9403.80 821.79-03 Furniture, of rattan
9403.80 821.79-04 Furniture, of buri
9403.80 821.79-05 Furniture, of glass
9403.80 821.79-09 Furniture, of other materials, n.e.s.
9403.90 821.80-00 Parts of the furniture of subgroups 821.3, 821.5 and 821.7

Source: www.dti.gov.ph
Background
Annexes 119

Annex 3:
Furniture Product Classification By
Function

Product Group Common Items

Armchairs, reclining chairs, couches, sofas, divans,
Upholstered Seating footstools, seating elements upholstered with leather,
cotton, indigenous fibers, synthetic materials, etc.
Non-upholstered Seats, armchairs, rocking chairs, seats convertible into
Seating beds, stools
Dining sets (tables and chairs), dressers, coffee tables,
Dining and Living sideboards, shelf system, room dividers,
Room Furniture
television/video/music system storage units
Fitted cabinets and kitchen units, kitchen tables and
Kitchen Furniture chairs, free-standing pieces such as movable trolleys and
butcher blocks
Beds, headboards, bedside tables, dressing tables,
Bedroom Furniture chests of drawers, wardrobes (fitted or free standing)

Other Furniture Cupboards, bookcases and wall units, occasional

furniture such as small table desks, mirrors, hall stands

Furniture Parts Parts of furniture or seats, including semi-finished

furniture

Source: Pearl2 State of the Sector Report on Philippine Furniture, 2003

120 State of the Sector Report - Philippine Furniture

Annex 4:
World Furniture Imports 2002-2004
(in US$)
Country 2002 2003 2004

1 USA 22,420,368,384 25,551,712,256 29,095,062,053

2 Germany 6,226,674,944 7,782,586,000 8,398,489,000

3 UK 4,408,833,536 5,525,536,556 6,975,026,678

4 France 3,762,010,240 4,622,104,704 5,616,354,891

5 Canada 2,919,364,916 3,168,968,982 3,903,128,237

6 Japan 3,076,594,688 3,407,467,904 3,748,293,789

7 Belgium 1,851,812,864 2,169,490,747 2,518,571,003

8 Switzerland 1,518,280,128 566,650,432 1,989,082,734

9 Austria 1,307,079,744 1,541,433,856 1,818,363,110

10 Italy 985,234,624 1,223,089,516 1,563,546,477

11 Sweden 989,318,304 1,239,977,152 1,429,115,927

12 Australia 705,744,992 916,034,528 1,225,941,713

13 Norway 760,759,952 890,804,222 1,038,716,761

Background
Annexes 121

Annex 5:
World Furniture Exports 2002-2004
(in US$)
Country 2002 2003 2004

1 Italy 8,656,179,968 9,682,223,959 10,665,375,689

2 China 5,359,362,816 7,296,456,192 10,167,660,698

3 Germany 4,914,424,064 5,904,052,000 6,889,433,000

4 Canada 4,658,201,467 4,828,730,823 5,286,156,049

5 Poland 2,741,889,024 3,679,555,072 4,672,747,792

6 USA 4,183,652,736 4,094,020,352 4,598,055,310

7 France 2,177,590,976 2,480,084,992 2,791,911,035

8 Malaysia 1,457,617,600 1,581,327,681 1,857,746,254

9 Belgium 1,494,922,496 1,661,481,372 1,805,149,894

10 Austria 1,175,195,008 1,462,058,240 1,691,729,019

11 UK 1,225,653,312 1,363,744,374 1,652,835,167

12 Sweden 1,152,134,688 1,348,598,432 1,579,818,771

13 Czech Rep. 1,045,749,691 1,233,301,828 1,520,734,053

122 State of the Sector Report - Philippine Furniture

Annex 6:
U.S. Furniture Imports, by Country 2000-2004
(in US$ million)
Ave.
Yearly
Growth
Rate
Country 2000 2001 2002 2003 2004 (%)

China 4,119.3 4,664.8 6,471.2 8,096.2 9,919.2 24.90

Canada 4,796.8 4,347.6 4,343.6 4,487.1 4,923.2 0.89

Mexico 3,034.2 3,044.5 3,682.3 4,145.8 4,210.4 8.86

Italy 1,295.9 1,260.9 1,303.6 1,355.1 1,218.3 -1.36

Taiwan 1,025.6 761.8 789.0 739.1 738.0 -7.16

Malaysia 491.9 431.0 495.7 531.1 636.9 7.43

Indonesia 491.7 495.8 539.0 523.5 542.1 2.56

Thailand 299.2 296.8 379.6 399.5 475.8 12.86

Brazil 114.7 161.4 251.7 292.1 404.6 37.82

Viet Nam 9.1 13.4 80.2 186.5 384.4 196.25

Germany 254.0 230.0 236.4 287.1 326.2 7.09

UK 279.8 236.7 221.9 209.7 256.7 -1.18

Background
Annexes 123

Annex 7:
EU25 Furniture Imports, by Country 2000-2004
(in Euro million)
Ave.
Yearly
Growth
Rate
Country 2000 2001 2002 2003 2004 (%)

Italy 4,075.2 4,219.9 4,211.9 4,204.8 4,440.8 2.20

Germany 3,744.8 3,834.8 3,794.2 3,663.7 4,360.5 4.23

Poland 2,013.4 2,352.9 2,600.6 2,982.5 2,961.7 10.34

China 972.5 1,094.2 1,414.0 1,867.6 2,656.4 29.01

France 1,388.2 1,309.5 1,248.0 1,177.6 1,315.4 -1.08

Denmark 999.6 977.9 1,022.3 1,052.0 1,084.3 2.09

Spain 851.8 899.6 985.4 990.2 1,002.2 4.21

Czech Rep. 770.4 915.5 1,035.8 1,053.7 927.8 5.44

Belgium 1,015.4 989.8 943.3 816.8 892.6 -2.84

Indonesia 837.0 789.0 762.1 774.6 833.9 0.04

Netherlands 719.7 726.3 741.2 788.9 822.2 3.41

124 State of the Sector Report - Philippine Furniture

Annex 8:
Major EU25 Furniture Importers, 2000-2004
(in Euro million)
Ave.
Yearly
Grow-
th
Rate
Country 2000 2001 2002 2003 2004 (%)

Germany 6,938.8 6,963.7 6,843.0 7,133.4 6,746.1 -0.64

UK 3,670.0 3,924.9 4,711.4 4,854.8 5,600.4 11.35

France 3,789.5 3,901.7 3,974.0 4,183.1 4,552.5 4.73

Belgium 2,013.3 2,049.1 1,960.6 1,919.0 2,017.3 0.12

Netherlands 1,928.1 1,892.8 1,840.1 1,785.5 1,868.6 -0.73

Spain 952.4 1,032.6 1,077.1 1,341.3 1,688.7 15.79

Austria 1,530.9 1,698.1 1,570.6 1,618.8 1,664.8 2.33

Italy 992.3 1,028.3 1,042.7 1,081.4 1,256.9 6.24

Sweden 940.0 937.5 1,055.6 1,100.8 1,148.1 5.23

Denmark 724.1 722.5 746.3 830.8 828.6 3.53

Poland 395.1 439.3 439.8 - 583.9 -

Background
Annexes 125

Annex 9:
Philippine Furniture Exports by Product,
2000-2004
(in US$ million)
Ave.
Yearly
Growth
Product 2000 2001 2002 2003 2004 Rate (%)

Wood
Furniture 143.3 114.9 125.9 115.2 127.9 -1.9

Rattan
Furniture 118.0 91.9 96.9 86.7 98.2 -3.5

Metal
Furniture 49.4 39.9 41.1 36.3 29.2 -11.9

Parts Of
Furniture 53.3 28.4 28.3 23.4 20.5 -19.2

Stone
Furniture 9.1 8.7 8.2 6.3 7.6 -3.0

Bamboo
Furniture 3.2 2.9 3.4 3.0 4.0 7.3

Furnishings 1.7 5.8 7.0 3.2 2.2 43.2

Plastic
Furniture 0.7 0.6 0.6 0.8 1.4 24.4
126 State of the Sector Report - Philippine Furniture

Annex 10:
Phil. Furniture Exports by Country 2000-2004
(in US$ million)
Ave.
Yearly
Growth
Country 2000 2001 2002 2003 2004 Rate (%)

U.S.A. (Excl. 225.41 184.49 209.91 176.68 192.36 -2.83

Hawaii & Alaska)

Japan 54.32 26.92 20.06 15.85 13.26 -28.3

Great Britain & 10.04 9.07 8.68 8.36 9.07 -2.27

Northern Ireland

Australia 9.09 5.92 6.55 8.13 7.28 -2.66

France 11.07 7.88 6.00 5.83 6.69 -10.18

Italy 3.96 3.67 3.84 5.01 5.49 9.30

Spain 5.95 5.78 5.10 5.11 5.34 -2.46

Saudi Arabia 5.26 4.90 6.25 5.33 4.85 -0.75

Netherlands 10.86 7.09 5.61 5.24 4.42 -19.45

Thailand 0.04 0.10 0.54 4.69 4.28 345.18

Canada 4.41 4.64 4.66 3.48 4.26 0.63

Background
Annexes 127

Annex 11:
Summary of Key Findings From 2005
Pearl2 Survey of Furniture Firms
Metro Manila Cebu Iloilo Total

Years in Bus. Freq. % Freq. % Freq. % Freq. %

6-10 Years 8 14.3 24 33.3 2 22.2 34 24.8
16-20 Years 14 25.0 16 22.2 1 11.1 31 22.6
11-15 Years 10 17.9 10 13.9 1 11.1 21 15.3
1-5 Years 5 8.9 7 9.7 4 44.4 16 11.7
21-25 Years 8 14.3 3 4.2 1 11.1 12 8.8
26-30 Years 6 10.7 4 5.6 0 0.0 10 7.3
31-35 Years 2 3.6 3 4.2 0 0.0 5 3.6
N.A. 0 0.0 4 5.6 0 0.0 4 2.9
36-45 Years 3 5.4 1 1.4 0 0.0 4 2.9
Total 56 100.0 72 100.0 9 100.0 137 100.0
Co. Size Freq. % Freq. % Freq. % Freq. %
Medium 34 60.7 27 37.5 0 0.0 61 44.5
Small 16 28.6 27 37.5 2 22.2 45 32.8
Micro 6 10.7 3 4.2 7 77.8 16 11.7
Large 0 0.0 10 13.9 0 0.0 10 7.3
N.A. 0 0.0 5 6.9 0 0.0 5 3.6
Total 56 100.0 72 100.0 9 100.0 137 100.0
Co. Setup Freq. % Freq. % Freq. % Freq. %
Corporation 42 75.0 62 86.1 0 0.0 104 75.9
Sole Prop. 13 23.2 10 13.9 9 100.0 32 23.4
128 State of the Sector Report - Philippine Furniture

Metro Manila Cebu Iloilo Total

Chairperson Freq. % Freq. % Freq. % Freq. %

Male 32 74.4 44 71.0 0 0.0 76 72.4
Female 11 25.6 18 29.0 0 0.0 29 27.6
Total 43 100.0 62 100.0 0 0.0 105 100.0
Educ. - Chair Freq. % Freq. % Freq. % Freq. %
High School 0 0.0 1 1.6 0 0.0 1 1.0
Some College 3 7.1 2 3.2 0 0.0 5 4.8
College Grad. 26 61.9 30 48.4 0 0.0 56 53.8
Post Graduate 13 31.0 5 8.1 0 0.0 18 17.3
N.A. 0 0.0 24 38.7 0 0.0 24 23.1
Total 42 100.0 62 100.0 0 0.0 104 100.0
President - All Freq. % Freq. % Freq. % Freq. %
Male 44 78.6 54 75.0 3 33.3 101 73.7
Female 11 19.6 17 23.6 6 66.7 34 24.8
N.A. 1 1.8 1 1.4 0 0.0 2 1.5
Total 56 100.0 72 100.0 9 100.0 137 100.0
Educ. - Pres. Freq. % Freq. % Freq. % Freq. %
High School 0 0.0 1 1.4 0 0.0 1 0.7
Some College 4 7.1 3 4.2 1 11.1 8 5.8
College Grad. 35 62.5 57 79.2 8 88.9 100 73.0
Post Graduate 16 28.6 9 12.5 0 0.0 25 18.2
N.A. 1 1.8 2 2.8 0 0.0 3 2.2
Total 56 100.0 72 100.0 9 100.0 137 100.0
Size of Prem. Freq. % Freq. % Freq. % Freq. %
> 250 sq.m. 49 87.5 71 98.6 6 66.7 126 92.0
Background
Annexes 129

Metro Manila Cebu Iloilo Total

Venue of Prem. Freq. % Freq. % Freq. % Freq. %

Commercial 44 78.6 53 73.6 5 55.6 102 74.5
Residential 6 10.7 9 12.5 4 44.4 19 13.9
Industrial 3 5.4 5 6.9 0 0.0 8 5.8
Both1 & 2 1 1.8 3 4.2 0 0.0 4 2.9
No Response 2 3.6 2 2.8 0 0.0 4 2.9
Total 56 100.0 72 100.0 9 100.0 137 100.0
Personnel
Mgt. Employees Freq. % Freq. % Freq. % Freq. %
Male 257 51.1 137 51.7 16 53.3 410 51.4
Female 246 48.9 128 48.3 14 46.7 388 48.6
Total 503 100.0 265 100.0 30 100.0 798 100.0
Prod. Super. Freq. % Freq. % Freq. % Freq. %
Male 201 80.7 337 68.5 13 68.4 551 72.5
Female 48 19.3 155 31.5 6 31.6 209 27.5
Sub-total 249 100.0 492 100.0 19 100.0 760 100.0
Prod. Worker Freq. % Freq. % Freq. % Freq. %
Male 3180 69.6 4302 65.7 182 76.8 7664 67.5
Female 1388 30.4 2242 34.3 55 23.2 3685 32.5
Sub-total 4568 100.0 6544 100.0 237 100.0 11349 100.0
Tech. Staff Freq. % Freq. % Freq. % Freq. %
Male 107 84.9 282 78.8 11 91.7 400 80.6
Female 19 15.1 76 21.2 1 8.3 96 19.4
Sub-total 126 100.0 358 100.0 12 100.0 496 100.0
Qlty. Control Freq. % Freq. % Freq. % Freq. %
130 State of the Sector Report - Philippine Furniture

Metro Manila Cebu Iloilo Total

Total Employees Freq. % Freq. % Freq. % Freq. %

Male 4020 65.7 5652 63.3 239 69.1 9911 64.4
Female 2095 34.3 3282 36.7 107 30.9 5484 35.6
Total 6115 100.0 8934 100.0 346 100.0 15395 100.0
Monthly Wages in pesos in pesos in pesos in pesos
Male 7,847.39 5,757.59 5,528.89 6,655.80
Female 7,860.07 5,735.30 5,154.00 6,659.84
Both sexes 7,853.73 5,746.44 5,341.44 6,657.82
Subcontracting Freq. % Freq. % Freq. % Freq. %
Yes 40 71.4 59 81.9 7 77.8 106 77.4
No 16 28.6 13 18.1 2 22.2 31 22.6
Total 56 100.0 72 100.0 9 100.0 137 100.0
Subcontractors
Ave. % of work
subcontracted 30.73 48.29 33.57 40.47
No. of Subcon 212 638 40 890
No. of workers 590 1,693 74 2,357
Subcon Location Freq. % Freq. % Freq. % Freq. %
Within Province 21 52.5 54 91.5 6 85.7 81 76.4
Within Region 16 40.0 3 5.1 1 14.3 20 18.9
Nationwide 2 5.0 1 1.7 0 0.0 3 2.8
Within Is. Grp. 1 2.5 3 5.1 4 57.1 0 0.0
Subcon Support Ranking Ranking Ranking Ranking
Credit 1.9 1.9 2.0 1.9
Tools 1.7 2.0 2.6 2.0
Background
Annexes 131

Metro Manila Cebu Iloilo Total

Subcon Work Freq. % Freq. % Freq. % Freq. %

Production 26 65.0 48 81.4 3 42.9 77 72.6
Pre-Production 13 32.5 16 27.1 6 85.7 35 33.0
Finishing 12 30.0 17 28.8 1 14.3 30 28.3
Others 5 12.5 6 10.2 11 157.1 22 20.8
Carp. and Up. 2 5.0 0 0.0 0 0.0 2 1.9
Carving 1 2.5 0 0.0 0 0.0 1 0.9
Fabrication 1 2.5 0 0.0 0 0.0 1 0.9
Lamination 0 0.0 1 1.7 0 0.0 1 0.9
Loading 0 0.0 1 1.7 0 0.0 1 0.9
Training 0 0.0 1 1.7 0 0.0 1 0.9
Subcon Use Freq. % Freq. % Freq. % Freq. %
Always 17 42.5 42 71.2 2 28.6 61 57.5
As needed 18 45.0 9 15.3 5 71.4 32 30.2
Peak times only 4 10.0 7 11.9 0 0.0 11 10.4
Seldom 1 2.5 1 1.7 0 0.0 2 1.9
Total 40 100.0 59 100.0 7 100.0 106 100.0
RM Source Freq. % Freq. % Freq. % Freq. %
Local 205 78.2 174 69.0 38 100 417 75.5
Imported 43 16.4 66 26.2 0 0 109 19.7
Both 9 3.4 7 2.8 0 0 16 2.9
N.A. 5 1.9 3 1.2 0 0 8 1.4
Total 262 100.0 250 99.2 38 100 550 99.6
Mode of Operations of Respondents
Manila - Mode Manual % Semi. % Mech. % N.A. %
132 State of the Sector Report - Philippine Furniture

Mode of Operations of Respondents (cont'd)

Iloilo - Prod. Manual % Semi. % Mech. % N.A. %
Matl. Handling 7 77.8 2 22.2 0 0.0 0 0.0
Packaging 9 100.0 0 0.0 0 0.0 0 0.0
Production 2 22.2 6 66.7 0 0.0 1 11.1
QualityControl 7 77.8 2 22.2 0 0.0 0 0.0
Average 69.44 27.78 0.00 2.78
Capacity Util. Metro Manila Cebu Iloilo Total
Ave. Util. Rates 86.17 89.71 93.75 88.51
Reason Low Util.
Raw Matl. Lack 2.2 2.3 0.0 2.3
Eqpmt. Lim. 2.9 2.5 0.0 2.6
Personnel Lim. 2.0 2.8 2.0 2.6
Space Lim. 3.7 2.7 0.0 2.9
QC System Freq. % Freq. % Freq. % Freq. %
Have spec. per. 29 51.8 49 68.1 5 55.6 83 60.6
Follow S.O.P. 32 57.1 33 45.8 2 22.2 67 48.9
Use int. res. 13 23.2 16 22.2 3 33.3 32 23.4
Use outside fac. 6 10.7 7 9.7 0 0.0 13 9.5
QC Probs. Freq. % Freq. % Freq. % Freq. %
Prod. Process 28 50.0 56 77.8 2 22.2 86 62.8
Raw Materials 22 39.3 26 36.1 3 33.3 51 37.2
Others 9 16.1 12 16.7 2 22.2 23 16.8
Prod. Dev. Freq. % Freq. % Freq. % Freq. %
Internal Cap. 46 82.1 63 87.5 9 100.0 118 86.1
External Cap. 29 51.8 15 20.8 1 11.1 45 32.8
Background
Annexes 133

Metro Manila Cebu Iloilo Total

Enough Info. Freq. % Freq. % Freq. % Freq. %

Yes 24 42.9 39 54.2 2 22.2 65 47.4
No 31 55.4 30 41.7 7 77.8 68 49.6
No Response 1 1.8 2 2.8 0 0.0 3 2.2
Total 56 100.0 71 100.0 9 100.0 136 100.0
Has Int. R & D Freq. % Freq. % Freq. % Freq. %
Yes 34 60.7 53 73.6 7 77.8 94 68.6
No 21 37.5 17 23.6 2 22.2 40 29.2
No Response 1 1.8 2 3.6 0 0.0 3 2.2
Total 56 100.0 72 100.0 9 100.0 137 100.0
Buyer Specs. Freq. % Freq. % Freq. % Freq. %
Yes 51 91.1 65 90.3 8 88.9 124 90.5
No 4 7.1 6 8.3 1 11.1 11 8.0
No Response 1 1.8 1 1.4 0 0.0 2 1.5
Total 56 100.0 72 100.0 9 100.0 137 100.0
Sales Source (%)
Export 72.74 95.11 74.17 86.08
Local 63.63 18.00 51.00 49.09
Mrkt. Segments Freq. % Freq. % Freq. % Freq. %
High End 41 73.2 43 59.7 7 77.8 91 66.4
Middle End 29 51.8 40 55.6 3 33.3 72 52.6
Low End 4 7.1 1 1.4 5 55.6 0 0.0
Exported to % % % %
US 58.9 72.2 66.7 66.4
Canada 7.1 12.5 22.2 10.9
134 State of the Sector Report - Philippine Furniture

Metro Manila Cebu Iloilo Total

Trade Promo Freq. % Freq. % Freq. % Freq. %

Brochures 37 66.1 29 40.3 3 33.3 69 50.4
Trade Fairs 49 87.5 45 62.5 6 66.7 100 73.0
Internet 27 48.2 28 38.9 1 11.1 56 40.9
Business Missions 12 21.4 18 25.0 3 33.3 33 24.1
Others 16 28.6 3 4.2 10 111.1 9 6.6
Competitor Freq. % Freq. % Freq. % Freq. %
China 35 42.2 33 44.6 3 27.3 71 95.9
Indonesia 16 19.3 9 12.2 2 18.2 27 36.5
Vietnam 7 8.4 19 25.7 1 9.1 27 36.5
Malaysia 6 7.2 4 5.4 0 0 10 13.5
Thailand 3 3.6 3 4.1 2 18.2 8 10.8
Strength as Competitor Freq. %
Low or cheap price 12 75.0
Low costs of labor/ cheap labor or material 5 31.3
Quality & design 4 25.0
Raw materials availability 2 12.5
Low cost, mass production, big production capacity 1 6.3
Government support & back up/logistic/structural 1 6.3
Export to New Freq. % Freq. % Freq. % Freq. %
Yes 19 33.9 24 33.3 4 44.4 47 34.3
No 30 53.6 47 65.3 3 33.3 80 58.4
No Response 7 12.5 1 1.4 2 22.2 10 7.3
Total 56 100.0 72 100.0 9 100.0 137 100.0
Local Mktg. Freq. % Freq. % Freq. % Freq. %
Background
Annexes 135

Metro Manila Cebu Iloilo Total

Export Mktg.
(cont'd) Freq. % Freq. % Freq. % Freq. %
Direct Selling 0 0.0 2 2.8 0 0.0 2 1.7
End Users 0 0.0 2 2.8 0 0.0 2 1.7
Export Sales Freq. % Freq. % Freq. % Freq. %
< US$ 50K 7 16.7 5 6.9 3 42.9 15 12.4
US$ 50K - 100K 7 16.7 5 6.9 1 14.3 13 10.7
US$ 100K - 300K 6 14.3 14 19.4 2 28.6 22 18.2
US$ 300K - 500K 6 14.3 14 19.4 0 0.0 20 16.5
US$ 500K - 1M 6 14.3 7 9.7 0 0.0 13 10.7
US$ 1M - 3M 4 9.5 22 30.6 1 14.3 27 22.3
> US$ 3M 5 11.9 5 6.9 0 0.0 10 8.3
N.A. 1 2.4 0 0.0 0 0.0 1 0.8
Total 42 100.0 72 100.0 7 100.0 121 100.0
Local Sales Freq. % Freq. % Freq. % Freq. %
< Php 1M 7 20.0 9 45.0 4 66.7 20 32.8
Php 1M - 3M 9 25.7 6 30.0 2 33.3 17 27.9
Php 3M - 5M 3 8.6 3 15.0 0 0.0 6 9.8
Php 5M - 10M 3 8.6 0 0.0 0 0.0 3 4.9
Php 15M - 20M 1 2.9 0 0.0 0 0.0 1 1.6
Php 20M - 25M 2 5.7 1 5.0 0 0.0 3 4.9
Php 25M - 30M 3 8.6 1 5.0 0 0.0 4 6.6
> Php 30M 5 14.3 0 0.0 0 0.0 5 8.2
N.A. 2 5.7 0 0.0 0 0.0 2 3.3
Total 35 100.0 20 100.0 6 100.0 61 100.0
Budget Alloc.
136 State of the Sector Report - Philippine Furniture

Metro Manila Cebu Iloilo Total

Fund Source Freq. % Freq. % Freq. % Freq. %
Own Funds 47 83.9 61 84.7 8 88.9 116 84.7
Bank Credit 19 33.9 33 45.8 6 66.7 58 42.3
Private Lenders 3 5.4 8 11.1 2 22.2 13 9.5
Others 1 1.8 2 2.8 3 33.3 6 4.2
Adv. Payment 0 0.0 1 1.4 0 0.0 1 0.7
Supplier Credit 1 1.8 0 0.0 0 0.0 1 0.7
SBGPC 0 0.0 1 1.4 0 0.0 1 0.7

Notes:

1. SP on page 127 refers to sole proprietorship firms.

2. Prem on page 128 refers to the business premises of the firms.
3. Monthly wages on page 130 refer to the weighted average monthly
salary of workers in the surveyed firms.
4. Problems with subcontractors on page 130 are ranked based on the
weighted average responses of the surveyed firms. The closer a
number to 1 is, the more serious the problem.
5. Subcontractor work on page 131 refers to the stage in the firms’
operations that is outsourced.
6. RM Source on page 131 refers to where raw materials are sourced from
by the respondents, in this case either locally or imported.
7. Mode of operations on page 131 refers to how each major phase of
manufacturing is conducted (i.e. manual or semi-mechanized) for each
major geographic are covered by the survey.
8. The reasons for low utilization on page 132 are ranked based on the
weighted average responses from surveyed firms. The closer a number
to 1 is, the more significant the reason.
9. Q.C. problems on page 132 refer to where in the firms’ operations
quality control problems are encountered, in this case, raw materials
or in production.
Annexes 137

Annex 12.1: Furniture Inbound Logistics Process Flow

FOREST Exporter/
(HARVESTING) Local Trader Subcontractor
Manufacturer

• Sorting Raw Materials: Components:

• Cutting
• Grading • Sizing • Receiving • Receiving
• Stacking • Bleaching • Recording • Recording
• Quality Control Returned
• Dry Shed • Dyeing • Sorting
• Warehouse-approved Rejects
• Storage • Treatment • Grading
• Work in process: • Cutting components
components/ • Sizing
Hardware/Paints semi-finished • Bleaching
• Quality Control • Treatment Hardware/Chemicals
Supplier
• Delivery • Quality Control • Receiving
• Stacking • Recording
• Recording • Quality Control
• Warehousing • Warehousing
CHEMICAL Local Trader/
IMPORTER Distributor

• Rework/Replace
Rejects
• Receiving
• Recording
• Quality Control
• Warehousing
138 State of the Sector Report - Philippine Furniture

Annex 12.2 Furniture Operations Process Flow

In-house Receiving/
Work in Process Assembly Finishing
Requisition Storage

Receiving/Storage Raw Materials • Cleaning • Requisition

Requisition • Recording
Components • Cutting • Painting
Attach components • Secondary packaging
Hardware, paints • Sizing • Special finishing
Chemicals • Treatment • Storing
• Dyeing
• Recording • Bleaching
• Releasing • Weaving
• Pulping
• Grinding
• Polishing
• Blowtorch

Quality Control

Requisition of materials
Work in Process
by Sub-contractor
Recording

• Weaving
• Metalcraft Quality Control
• Woodcraft
• Wireworks
• Others
• Blowtorch
Annexes
Background 139

Annex 12.3. Furniture Outbound Logistics

Process Flow

Packing Containerization Shipment

• Box Construction
• Box Marking • Final Recording • Warehousing
• Tagging • Checking • Service Arrastre Handling
• Labeling • Loading to Container Van • Consolidation
• Inner Carton Packing • Freight Forwarding
• Master Carton Packing Quality Control • Loading to Ship

Annex 12.4. Furniture Marketing and Sales

Process Flow
Trade Fairs Post Trade Fairs Selling Mission Post Selling Mission Referrals

• Booked orders • Follow-up of • Visit of stores • E-mail/follow-up • Meeting wth buyers

• Orders under negotiation P.O. • Meeting buyers of samples and • E-mail of photos
• Booked sample orders orders under • Direct selling counter-samples and quotation
• Distribution of negotiation • Attendance of fairs • E-mail of photos and • Mailing of
catalogues, calling buyer inquiries • Gathering of price quotations catalogues and
140 State of the Sector Report - Philippine Furniture